Another market disruption from higher interest rates is virtually certain, according to former Federal Reserve Chairman Alan Greenspan.
"This is a very tough period to get through," he added about the Fed increasing interest rates. "Normalization is great, but the process of getting there is going to be very rocky."
Greenspan said there was no way to get around bond market volatility but said it was necessary to help the Fed and other central banks reduce overall debt.
He did not give specifics on how fast Fed Chair Janet Yellen should increase rates, currently predicted to be a highly gradual process from near-zero.
Greenspan said generally the economy had "improved somewhat" but "we are still below normal." Gross domestic product grew about 0.2 percent in the first quarter, an estimate that is likely to turn negative by the time revisions are completed. Consensus second-quarter growth is projected to be 3.3 percent, according to a FactSet survey of economists, but that number appears unlikely to be reached as well. The Atlanta Fed is estimating the number to be 0.8 percent.
Greenspan's remarks came at an emerging- and frontier-markets-themed event filled with private equity fund managers and their investors.
Greenspan said it's human nature to be overly fearful of such countries, making for investment opportunity.
He recommended buying and holding securities in such developing countries for the long term as part of a broader portfolio, even if there was still risk.
That, he said, reflected his overall views on how most people should invest in stocks.
"The best strategy for equity investment has always been buy and hold, and forget it," he said.
"Once you start to try and trade the market. I don't care how good you are, how smart you are, you will not beat an index fund."