Review & Outlook

Our take on the investing, financial, & economic themes of the day

The Wisdom of Standing Pat

28 March, 2011 by Ben O'Brien in Commentary

It is hard not to act during a crisis, especially with the constant hype of the 24-hour news cycle and the wonders of modern technology that make it possible to make stock trades anytime, anywhere from a smartphone.  Often, though, doing nothing–avoiding panic and taking a long term perspective–is the best thing to do. A recent Businessweek article makes the case for standing pat:

Since the financial crisis sent U.S. stocks to a 13-year low in March 2009, the market has staged its biggest two-year bull run since the Great Depression. The rally has persisted despite high unemployment, the European debt crisis, and a devastating oil spill. Even popular uprisings across the Arab world, which sent oil prices higher, and Japan’s earthquake and tsunami on Mar. 11, which led to the threat of a nuclear meltdown, couldn’t stop it. After dropping 4 percent over the course of three days, the market recovered. By the end of business on Mar. 21, the Standard & Poor’s 500-stock index was up 3 percent for 2011 and 27 percent since July 2. For investors, the whole episode seemed to verify Vanguard founder Jack Bogle’s maxim: “Don’t just do something, stand there!”