Don’t Just Do Something, Sit There!

11/08/2011 3:12 pm EST

Focus: MARKETS

Russel Kinnel

Editor, Morningstar FundInvestor

Investors should not overreact to the day’s headlines…it’s best to stick with your plan so you don’t get out at the wrong time, cautions Russel Kinnel of Morningstar FundInvestor in this exclusive interview with MoneyShow.com.

Russel, we have seen a lot of volatility. What are some of the ways that investors should be reacting to the market?

I think the key is not to overreact too much and panic. You want to come in with a plan, and continue to execute on that plan.

If some bargains come up, great. If you maybe made some mistakes and then realize how risky your investments were, then maybe you make some changes, but don’t rush and don’t panic.

Don’t think that the headlines you read about today mean the market is going to go up or down. It is never that easy, so generally investors are better off not overreacting—as Jack Bogle likes to say, "Don’t just do something, sit there!"

But it is awful hard…investors are so panicked, so nervous, and as you say, the headlines are screaming it, the business stations are screaming it, and they’re just like, get me out now! That is the wrong thing to do, you are saying?

Yeah, definitely. You look at what happened…we can go back to 2008 and 2009 to get an idea. In early 2009, stocks were extremely cheap, but the markets were so scary and the headlines were so scary that investors were leaving in droves.

It turns out that maybe it was one of the great buying opportunities of all time. We saw in early 2009 tons of money came out and then the market took off starting in March 2009.

You don’t want to do that again. Generally, you are better off with anything going against the trend.

So this is not a "new normal." We have seen this type of action before, although it may have been triggered by something different.

That’s right. We have seen huge market moves, and we have seen lots of bad things happen in the world and we have had world wars, we have had Vietnam…

We have had all sorts of terrible things, and generally the economies are resilient, markets are resilient, and people are resilient. So you don’t want to read too much.

I don’t think we are at the end of the world. So don’t overreact, but certainly you want to have a plan, so that it all makes sense. You want to really kind of have a plan that will keep you from overreacting in a time like this.

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