The One Piece of Debt Ceiling Investment Advice You Need

A blog about business and economics.
Oct. 14 2013 12:19 PM

The One Piece of Debt Ceiling Investment Advice You Need

Wall Street Bull says: Do nothing.

Photo by Spencer Platt/Getty Images

Lots of people, naturally, are wondering how they should play this week's debt ceiling crisis as a matter of investments. Sell everything? Buy everything? Buy something? Credit default swaps maybe?

The advice you need to know comes from today's Nobel Prize winners Eugene Fama and Robert Shiller. And the advice is: Don't do anything. Financial markets are generally really good at pricing all the relevant information much faster than you can (Fama), and a large class of important deviations from strict efficient financial markets theory consists of emotion-driven overreactions and herding behaviors (Shiller). One very typical investment error is to wait until something terrible happens and the market crashes, and then investors turn sour on stocks and sell low. Don't do that. If you can't stomach the thought of owning financial assets that sometimes crash rapidly for reasons that seem unrelated to the long-term health of the American economy, then you just shouldn't be owning stocks at all.


The good news is that, even though there are a lot of lousy investment products out there, there are also some good ones. Look for a low-fee, diversified life-cycle fund that will keep your money in a mix of stocks and bonds, and try not to think too closely about its ups and downs. The goal is to save some money each and every month and then have that money decades later.

This is all especially true because I think the odds remain good that this will all get resolved Wednesday afternoon by John Boehner agreeing to a Hastert Rule violation that lets a debt ceiling increase pass the House. He clearly doesn't want to do that, but adherence to a caucus rule of procedure would be a really dumb reason to default, and my best guess is it won't happen.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

iOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.


Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

What Charles Barkley Gets Wrong About Corporal Punishment and Black Culture

My Father Was James Brown. I Watched Him Beat My Mother. Then I Married Someone Like Him.

  News & Politics
Sept. 17 2014 12:02 PM Here It Is: The Flimsiest Campaign Attack Ad of 2014, Which Won’t Stop Running
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
Sept. 17 2014 1:59 PM Ask a Homo: Secret Ally Codes 
  Double X
The XX Factor
Sept. 17 2014 1:26 PM Hey CBS, Rihanna Is Exactly Who I Want to See on My TV Before NFL Games
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
Brow Beat
Sept. 17 2014 1:01 PM A Rare, Very Unusual Interview With Michael Jackson, Animated
Future Tense
Sept. 17 2014 12:35 PM IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.