Ask Matt: Should I panic when smart money does?

Q: Should I panic when smart money does?

A: Some well-known investors like billionaire Carl Icahn and bond fund manager Bill Gross of Janus have warned investors about the market. But long-term investors need to understand their concerns are probably different than yours.

Professional money managers need to justify the fees they charge their clients every quarter and year. If they can’t do so, even in the short-term, their customers might shift their money. Pro investors must also consistently beat the market by a sizable margin in to earn their fees. Smart money investors also need to attract new customers, which often requires making bold calls in the media. Lastly, big-time investors often specialize in a narrow range of investments, so they are more exposed to volatility in their asset class of choice. Individual investors, though, aren't under all this pressure. Investors who buy diversified baskets of investments aren’t as exposed to a correction in a single asset class like bonds or U.S. stocks. Also, by choosing low-cost investments, individuals don’t need to worry so much about beating the market. Best of all, individual investors can afford to invest for many years, allowing them to ride out short-term swings.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.