Given the anticipation of the Federal Reserve raising its benchmark rate again on Wednesday, stocks are selling low and likely won't get much lower, so it's probably best that the average investor, depending on their age and financial situation, "hold onto what they have and maybe even add a little bit," David Rubenstein, the co-founder and co-chairman of the Carlysle Group and author of the new book "How to Invest: Masters on the Craft," tells Newsmax.
He also said in an interview with Newsmax's "The Record With Greta Van Susteren" Tuesday that he doesn't expect further large interest hikes after the Federal Reserve's anticipated announcement Wednesday of another hike of three-quarters of a point.
"If the inflation situation got much worse, they might increase it by more than that," said Rubenstein, but he doesn't anticipate that happening.
The hike will lift the Fed's benchmark rate, affecting consumer and business loans, to a range of 3% to 3.25%, or the highest level in 14 years. The rate was zero at the beginning of this year, but the Fed is also expected to signal that it could reach 4.5% by early next year.
"The biggest mistake that average investors make, people would say and these experts would say, is that they sell at the wrong time, and they buy at the wrong time," Rubenstein told Van Susteren. "When markets are going up, people are rushing in, and with markets going down, people rushing out. The truth is when markets are down, they will rebound. Whether it's a day from now or a month from now, nobody really knows, but they will rebound."
Rubenstein's book details interviews he's had with some of the nation's most successful investors, and he told Newsmax that one of them, Warren Buffett, has enjoyed a compounded high rate of return of 20% a year for 60 years because "he basically doesn't sell very much."
Buffett, in the book, says that when one sells or buys, there are transaction costs and that there are taxes to pay on profits from sales.
And as Buffett doesn't sell much, Rubenstein explained, "he doesn't have to pay a lot of taxes, and as a result, he has more money to compound."
Meanwhile, stocks closed lower on Wall Street Tuesday ahead of the Fed's announcement, and Rubenstein said the market has already anticipated a hike of 75 basis points.
"If the Fed was to go 100 basis points, then the market would really decline because the market would say the Fed knows more about how bad inflation is, and they're letting us know," Rubenstein told Van Susteren. "We have had great stock prices over a number of years because interest rates were essentially low or at zero and money was free. When you can borrow money for no cost, people do and they grow businesses that way, and they can expand their businesses. When money costs something, it's harder to expand. It's harder to hire people, so it obviously has a depressing effect on the economy."
However, Rubenstein said he doesn't expect the Fed to make a further drastic hike in its meetings in its final meetings of the year.
"I think the Fed has basically telegraphed that they'll do 75 basis points in this meeting, and then probably 25 basis points in each of the final two meetings in November and December," he said. "Now, if the inflation situation got much worse, they might increase it by more than that. But today the markets are basically saying we expect the Fed will do another 50 basis points after tomorrow and then probably no increase after that early next year."
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