Vanguard's Bogle: Ignore Stock Market's Noise and Hold on for Long Term

Vanguard Group founder Jack Bogle has some advice for how to deal with the stock market's recent volatility: ignore it.

"Long-term investors simply are not affected by the comings and goings of the market," he told MarketWatch.

"As I have said before, the daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing. One of my favorite rules is ‘Don’t peek.’ Don’t let all the noise drown out your common sense and your wisdom."

The S&P 500 index fell 10 percent from its Sept. 19 record high to its Oct. 15 low and has rebounded 11 percent since then, hitting a new record peak Monday. So the net move was quite small.

"Just try not to pay that much attention, because it will have no effect whatsoever, categorically, on your lifetime investment returns," Bogle said. "Returns are created not by the stock market, they are created by U.S. business, our corporations."

Some investors are concerned that falling oil prices could hurt stocks by raising the threat of deflation. U.S. crude prices dropped to a two-year low of $78.78 a barrel Monday.

"The economic numbers are still looking good, but if oil keeps going lower, you look at it from a macro implication and it’s deflationary," Viren Chandrasoma, managing director of equity trading at Credit Suisse, told The Wall Street Journal.

Meanwhile, many experts warn that market volatility needn’t be feared and it can be used to your advantage.

“Make volatility your friend rather than your enemy,” Scott Clemons, chief investment strategist for private banking at Brown Brothers Harriman, told the Fox Business Network.

He also cautioned against always chasing daily headlines. “It’s not about Ebola and it’s not about the midterm elections,” Clemons explained. “It’s about a company’s earnings. Don’t focus on day-to-day market volatility, but rather on the long-term value of the company.”

Some see the recent volatility as a trend that was due to arrive.

The market's recent wild rides follow months with few 1 percent swings. The S&P posted just one move of 1 percent or more in September. The same thing happened in August. The S&P failed to post a move of 1 percent or more in May and June.

“This was an almost unprecedented change in behavior in the market where we went from a low volatility environment to a pretty volatile environment in a short period of time,” Rocky Fishman, equity derivatives strategist at Deutsche Bank, told The Wall Street Journal.

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