Despite Losses, Star Investor Trusts In Stocks David Swensen, Yale's chief investment officer, says investors should stay the course and not follow their instinct to sell their holdings. The money that people are investing in the market today is buying stocks at prices that are far more attractive than 18 or 36 months ago.
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Despite Losses, Star Investor Trusts In Stocks

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Despite Losses, Star Investor Trusts In Stocks

Despite Losses, Star Investor Trusts In Stocks

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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It's MORNING EDITION from NPR News. I'm Linda Wertheimer.


And I'm Steve Inskeep. We'll talk this morning about why the stock market keeps falling and what you can do about it. The many people offering investment advice right now include President Obama.

President BARACK OBAMA: Buying stocks is a potentially good deal if you've got long-term perspective on it.

INSKEEP: That's the president speaking yesterday as the Dow Jones Industrial Average was slipping toward about 6,700. In a moment, we'll ask: What is still not working in the economy? We begin with some advice for worried investors, which comes from a man who has yet to lose his entire portfolio. David Swensen manages Yale University's endowment, and he spoke with NPR's Chris Arnold.

CHRIS ARNOLD: David Swensen has made billions of dollars for Yale. Over the past two decades, he averaged 16 percent annual returns. That makes him like the LeBron James or Tiger Woods of investing. From his offices overlooking the Yale campus, Swensen is checking in with one of his top traders, Celeste Benson.

Dr. DAVID SWENSEN (Manager, Yale University Endowment): What's the market doing today?

Ms. CELESTE BENSON: It's down. The Dow is down to 2.6 percent, and the S&P is down over 3 percent.

Dr. SWENSEN: How about the…

ARNOLD: A lot of things have been down lately, and Swensen has taken some losses. Yale's endowment is down about 25 percent.

Dr. SWENSEN: It's not fun.

ARNOLD: But in a way, it's sort of reassuring. If you're losing money, you're not alone. Even the best investors on the planet are losing money right now -Swensen is, Warren Buffet is. But Swensen says even with things looking as bleak as they are, it's really important not lose your nerve. Swensen's written a book on investing for average people, and he says he knows investing your own life's savings is challenging.

Dr. SWENSEN: The other day, I was with a friend of mine. He was a friend who is contemplating, you know, retirement in the next five or 10 years. And…

ARNOLD: As you might imagine, Swensen gets some questions from friends who are nervous. And he says he finds himself having to basically talk them down off the ledge from making big mistakes. In this case, his friend was getting ready to bail out of the stock market and sell everything. But Swensen told him not to do that, to just grit his teeth and stay in the market.

Dr. SWENSEN: Absolutely. As a matter of fact, you should be a lot more excited about the contributions that you're making to your retirement plan today than you were about the contributions that you made 18 months or 24 months or 36 months ago because you're putting money to work at prices that are far more attractive.

ARNOLD: Here's the thing: The human instinct is to sell when stocks fall. If something's hurting you, you want to make it stop and get away from it.

Dr. SWENSEN: But in the investment world, you have to have the exact opposite instinct.

ARNOLD: The Dow has now fallen more than 50 percent from its peak. Last month, it saw its biggest one month drop since 1933. And if you sell stocks now, odds are that you'll be losing money on anything that you bought over the past 10 or 12 years.

Dr. SWENSEN: When you buy high and sell low, it's a very, very tough way to make money.

ARNOLD: And it may not be this month or this year, but Swensen says that the economy will recover and the stock market will start rising again. So he says that you just need to hang in there and not make any big changes to your retirement portfolio.

Dr. SWENSEN: Yeah. Don't panic.

ARNOLD: But Swensen says there's something really important that you can do. I you're not already investing through the so-called index funds, he says you should transfer your money into index funds and out of higher-cost mutual funds. Index funds have very low fees because you're not paying anybody to pick stocks. They just basically track the market as a whole. Swensen says if you're not a professional managing billions of dollars like he is, it's almost impossible to beat index funds.

Dr. SWENSEN: We've got 22 professionals who spend their entire professional career trying to identify market-beating strategies.

ARNOLD: Now, why isn't that what a mutual fund does? 'Cause most people think, oh, okay. You know, I've given my money to this mutual fund and so have 10,000 other people, and so they've got a billion dollars and all these smart guys and they're going to go out and beat the market.

Dr. SWENSEN: Well, I mean, the problem is that the mutual funds have a profit motive, and the way they are profitable is to charge large fees.

ARNOLD: Swensen says over 30 years, even people with average incomes could end up with hundreds of thousands of dollars more when they retire if they avoided those heftier fees.

Dr. SWENSEN: It's very expensive.

ARNOLD: As for his friend, Swensen says he's put him in touch with a financial advisor at TIAA-CREF, who's getting him into index funds. Swensen recommends that company, along with Vanguard. He says these not-for-profit fund companies have much lower fees.

There is more of this advice for investors at

Chris Arnold, NPR News.

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