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

99741759
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.

Advertisement

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.

TODAY IN SLATE

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

Trending News Channel
Sept. 19 2014 1:11 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Weigel
Sept. 20 2014 11:13 AM -30-
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 20 2014 3:21 PM “The More You Know (About Black People)” Uses Very Funny PSAs to Condemn Black Stereotypes
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.