Suze Orman’s Advice for Every Investor Ready To Jump Ship Right Now
Written by
Laura Bogart
Edited by
Kristen Mae
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It’s no secret that it’s a stressful time in the stock market right now. You might feel like you need some Dramamine before checking the latest market report, and then, perhaps, a paper bag to hyperventilate into. You might be tempted to just sell everything in your portfolio and walk away into the sunset.
However, before you hightail it out of your investments, take a deep breath (and not into that paper bag). Now is actually not the time to jump — but to stay put. At least, that’s the wisdom Suze Orman has for jittery investors.
In a recent Money Monday post, Orman spoke directly to people feeling anxious about the market, offering clear and surprisingly easy-to-implement investing advice.
Remember, Ups and Downs Are Part of the Market
Orman acknowledges that anyone paying attention to U.S. markets has reason to feel uneasy, given that major stock indexes have fallen up to 12% from recent highs.
“That ‘correction’ can be nerve-wracking, but this is where perspective is important too. The five-year annualized return is nearly 16%, and over 10 years the annualized return is nearly 12%,” she said.
Orman encourages investors to remember one of the golden rules of investing: “Don’t let short-term turbulence steer you away from the long-term potential of stocks to deliver the inflation-beating gains to meet goals, such as retirement savings.”
Look to Passive Investments
Keeping a cool head about the market doesn’t mean you can’t take advantage of hot opportunities. To be a super smart investor, Orman wants you to stick with index mutual funds or exchange-traded funds (ETFs) as the core of your stock portfolio.
“Both types of funds are known as ‘passive’ types of investments. Passive because there is not a manager or team deciding what to own or sell. Rather, an index fund or ETF aims to track a given benchmark, such as the S&P 500,” she said. “And passive investing tends to outperform actively-managed funds.”
Orman cites Morningstar data showing that fewer than one in four active funds outperformed passive funds with a similar investment focus over the past year — a consistent trend over time.
The Expense Ratio Matters
Another key reason Orman favors index funds over actively managed funds is the expense ratio — the annual fee all funds and ETFs charge. The fee is deducted from the fund’s performance, so while you don’t see it in your statement, it impacts your returns.
“Index mutual funds (what typically is available in retirement plans) and ETFs (available at all the discount brokerages) have lower expense ratios than actively managed stock funds,” Orman explains. “The difference can be around 0.45 percentage points. That might seem small, but when you compound that fee over many years, it adds up.”
Bottom Line
While the market news these days feels more doom and gloom than rise and shine, there are still plenty of reasons to stay optimistic. Suze Orman wants you to remember that market fluctuations are normal and shouldn’t derail your long-term goals. She encourages you to stay invested, focus on time-tested strategies, and favor low-cost passive investments like index funds over actively managed ones.
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