Investment icon Warren Buffett, CEO of Berkshire Hathaway, offered colorful imagery to emphasize the importance of buying low and selling high in an interview last month with Quicken Loans executives.
"This imaginary person out there — Mr. Market — he's kind of a drunken psycho," Buffett said, according to
Benzinga news service.
"Some days he gets very enthused, some days he gets very depressed. And when he gets really enthused, you sell to him, and if he gets depressed you buy from him. There's no moral taint attached to that.”
And how should we small fry approach investing?
"Pay no attention to headlines in the paper or people on television or anything, but put aside a little money each month," Buffett said.
"I'd put it in a very low-cost index fund. And if you do that regularly throughout your working career, you're bound to have a substantial amount of capital."
Buffett advises a diversified stock portfolio and blocking out the chatter.
"Emotions are contagious, and emotions have no business in investing."
Meanwhile,
Wall Street Journal columnist Jonathan Clements says there are two rules to keep in mind when investing. "Never trade based on a market forecast and design your portfolio so that short-term results don't matter," he wrote.
"The implication: if you think you might panic and sell during a market decline, you should sell now, while prices are still at lofty levels. Few investment mistakes are more damaging than dumping stocks at the depth of a bear market."
Any money you need for spending in the next five years shouldn't be invested in anything riskier than short-term bonds and certificates of deposit, Clements noted.
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