Invest in Index funds when Markets are in Panic.

In a previous post, I had advocated the use of Index Funds for Investing. My point was: it is not possible to identify the stocks that will outperform the Index. For Investors, it is wise to invest in Index Funds and trade in stocks.

Now, the same advise comes from Jeffrey Carter who advises investing in Index Funds. In a post titled “What Average Investors should do In Market Panics and Meltdowns”, the advise is:

Don’t pick individual stocks. Making money in them is like doing heroin. It feels good for awhile, but then the habit gets ever more expensive. Eventually, you lose. Instead, take your money and put it in a no load mutual fund that replicates the broad indexes, like the S&P 500, the Russell 2000 or something like that. Over the long haul, you won’t lose. You also won’t pay many fees. Investing is practically free.

Once you put your money into a fund like that, ignore the news. Don’t look at the day to day gyrations of the market. Just consistently put money away. When the market dives like it has the past few days, you are buying cheaper. When it rallies like it did earlier this year, you are buying at a higher price. But the sum of your actions will be an even price over time and your money will grow at around an 8% clip. When you are old and gray, you will have a nice nest egg to spend on yourself at retirement.