What to do With Your Investments in These Tough Markets

With the volatility and uncertainty in the financial markets lately, it has had a lot of people asking what they should to with their investments. Some people are abandoning the stock market completely and sticking with cash or bonds, while others seem to be salivating at the drop in stock prices. So, what should you be doing?

For most people, the answer is simple. Nothing. If you're like most working Americans, you are probably still quite a few years from retirement, and you're plugging away by investing in your company's 401(k) every paycheck or regularly investing in an IRA. If that's the case, the recent stock market news shouldn't be of much concern because since you're still buying stocks every week, or every other week, you're buying shares at these discounted prices, which will just produce greater gains when the market recovers.

The Market Can Go Up as Fast as It Went Down

When news hit earlier this week that the broad markets dropped anywhere from 3-5% in one day, panic set in as people saw significant drops in their portfolios. Many of these people quickly called their brokers or went online to sell everything and move their money into a safe money market or bond fund that would be lucky to earn 4% over the next full year. Those people probably didn't expect the good news from the government to follow in the next few days that would spark a rally that sent the same stocks up nearly 8% in just two days, wiping out an entire week of losses.

Sure, this may only be a short-term and the markets may sustain further losses in the future, but for those who had a knee-jerk reaction to a bad day on Wall St. could have recovered their losses and even gained a little more back just by holding. The markets will always be moving, and if you think you can predict what will happen and shuffle your investments accordingly, you're playing with fire.

Invest Like Warren Buffett

Warren Buffett is one of the wealthiest people in the world, and one of the most successful investors ever. What would Warren Buffett do in today's market? He has been quoted a number of times on what to do when times get tough:

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

That's right. If you see people selling, that means you should be greedy and buy more. Use this turmoil in the financial markets to get more for your money. In most cases, your money will buy you 20% more than it did just a year ago. You like buying groceries on sale for 20% off, so why should your investments be any different?