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The Only Thing You Need To Know About The Fed’s Rate Hike

Just about no one was surprised when the Federal Reserve’s Open Market Committee agreed to boost the federal funds rate by three-quarters of a percentage point on Wednesday afternoon. The increase takes the short-term interest rate up to a new range of 3.75% to 4%.

What did surprise some investors, however, was the reaction to the move. After the release of the Fed’s statement at 2 p.m. ET, markets jumped. But less than an hour later, before Fed Chair Jerome Powell was finished with his news conference, major stock indexes gave back all of their gains and then some.

There’s a lesson here that every investor should learn from the day’s whipsaw moves: Trying to make short-term trades based on imperfect information is a good way to get yourself in trouble. The only thing you really need to take away from the Fed’s rate hike is that a long-term investing strategy is the best way to steer clear of potential landmines that short-term traders fall prey to all the time.

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This post originally appeared at The Motley Fool.