The ASX 200 Index keeps falling: What should investors do now?

The ASX 200 has faced headwinds from high inflation, rising interest rates and geopolitical conflicts.

A young man in a city street with a hopeful look on his face.

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The S&P/ASX 200 Index (ASX: XJO) has been struggling of late.

In the week gone by, the benchmark index finished in the red on Monday, Thursday and Friday.

This sees the ASX 200 down 6.7% since the closing high on 3 February and down 3.2% since 15 September.

So, what should investors do now?

What to do when the ASX 200 is in retreat?

The urge to sell can be strong during times when the stock market is falling.

But that can often be a costly mistake, as many investors will sell after a sharp fall and then sit on the sidelines during the almost inevitable rebound.

While the ASX 200 could certainly slip further from today's levels, the long-term trend remains decidedly higher. Especially when you include dividends in the picture.

Now, some stocks have sold off due to company-specific reasons, and investors may wish to hit the sell button on those. But most have been hit with headwinds from rising interest rates, multi-decade high inflation, and soaring geopolitical turmoil.

But these external forces will almost certainly abate. In fact, we can already see the light at the end of the tunnel in central banks' battle against inflation.

When global growth picks back up, history tells us that quality companies with big moats, top-level management, and operating in growing markets should rise back to the top.

But don't just take it from me.

What does Warren Buffett say?

Here's what billionaire investor Warren Buffett had to say about market volatility. "Embrace what's boring, think long-term, and ignore the ups and downs."

He also says, "Our favourite holding period is forever."

And perhaps most famously, "Be greedy when others are fearful."

Judging by the performance on the ASX 200, there's plenty of fear around. But rather than joining in the selling, this could be an opportune time to be greedy and pick up quality companies at a discount.

Like we saw in the aftermath of the pandemic sell-off. Despite the recent pressure, the ASX 200 is still up more than 46% since 20 March 2020.

"Never overpay for anything," Warren Buffett advises.


Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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