In a time of economic uncertainty, the stock market is currently in a correction, with the S&P 500 down about 17% since its all-time high, as of April 4. The VIX, colloquially known as the investor fear index, has also spiked, since the market expects an increase in short-term volatility.
This stock market downturn is a result of many of President Trump’s new policies, primarily with large tariffs imposed on major U.S. trading partners such as Canada, Mexico and China.
Many casual investors may be left confused, wondering whether to buy on the dip or sell to minimize their losses. During this moment of uncertainty and volatility in the market, investors, particularly young ones, should remain calm and hold their shares, neither buying or selling.
It is imperative not to make rash decisions, especially for college students with little experience in the finance world. Young investors have an advantage over older investors because they have time on their hands. Unlike people nearing retirement age, they have more time to recover from losses and earn money for future investments.
Mark Patishman, a junior working as an Equity Analyst for SMIF and majoring in finance and entrepreneurship, says, “You can never go wrong with companies that are good businesses at the core.” He also added that there are certain businesses that have a monopoly on their market; therefore, a recession in the market will not affect their future outlook.
The market historically goes up in the long run. The S&P 500 has had positive 1-year periods in 73% of occurrences, whereas 94% of 10-year periods have been positive. This means that holding stocks for long periods of time statistically makes more money than buying and selling a stock within a short period of time. Therefore, it is generally advisable to invest for the long term.
Warren Buffett, billionaire investor and owner of Berkshire Hathaway, advises investors to avoid panic selling. The market will always pull back from losses, even if it takes a while. During recessions, Buffett also advises researching and buying quality stocks at a discounted price. He recommends playing the long game as opposed to constantly trading in the short term.
Malakiyah Fairclough, a sophomore dual majoring in finance and economics, recommends looking at large companies as opposed to smaller, inherently riskier, stocks. “It is not like last semester with meme coins or Bitcoin; if you are fresh into investing, stick to blue-chip stocks.”
So if you are an investor with little experience, don’t panic during times of market uncertainty. Look at companies that have good fundamentals and companies that trade at a discounted price. Short-term trading is risky and should be left to the experts.