Weathering the stock markets: one investor's strategy

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Copyright 2019 The Associated Press. All rights reserved

FILE - In this Monday, March 9, 2020, file photo, a television screen on the floor of the New York Stock Exchange headlines market activity. (AP Photo/Richard Drew, File)

NEW YORK, N.Y. – Buy and hold — and don't sell when the stock market plunges.

That's the strategy many market pros use, and it has served me well through more than three decades as an investor — and as a financial journalist who needed to know daily what was happening in the markets. I've stuck with that strategy through gyrations as bad or even worse than what we've seen the past two weeks.

Until now.

I moved a significant amount of money out of 401(k) stock funds and into a savings fund backed by short-term debt securities as I watched the Dow Jones Industrial Average rise and fall by 1,000 points and more in a day. I moved the first chunk on Feb. 25, when the Dow fell nearly 880 points, and then pulled the rest of my money out of stocks on Feb. 28 as the Dow’s loss over seven trading days approached 4,000 points. Not because I'm anxious; it's because I'll need that money in the near future and I don't have the time as I did in the past to wait out the market's volatility. I need my nest egg to be intact. It's one way — but not the only one — to be a thoughtful investor.

_____ Editor’s note — Joyce M. Rosenberg has been a business news reporter and editor with The Associated Press, including a 15-year assignment as the news cooperative's financial markets editor, for more than three decades. She has written or edited stock market stories during most of the market’s turbulent periods since the October 1987 crash.

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I actually began moving money very slowly from stocks into savings four years ago; as prices rose, I collected my profits but I also kept a sizable amount in stocks to take advantage of the market's gains. With my last transfers in recent weeks, the strategy left me with a loss of 9% in my stock holdings, compared with the Dow's nearly 19%, and 1.7% on my overall portfolio, calculated from Feb. 19. On that day, the Standard & Poor’s 500 index closed at a new high.

The strategy of buy and hold rests in part on the belief that the market will recover, and that selling means taking a loss that ultimately will be unnecessary and costly. It means having some faith and a strong stomach while watching the market's oscillations. It means being more like Warren Buffett than a day trader.