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Suze Orman's advice to investors on the market's drop: 'Rejoice'

Suze Orman.
Photo by Marc Royce

The Dow closed 1,000 points down Monday, but personal finance expert Suze Orman isn't worried. In fact, she says investors should "rejoice."

Appearing on CNBC's "Closing Bell" on Monday, the New York Times best-selling author says the market's drop — due in large part to fears about the coronavirus — is an opportunity for investors to buy stocks at a cheaper price than they've been able to in years.

A single day drop doesn't mean much for those investing for a retirement that's 10 or 40 years away, says Orman, but a decline lasting a month or longer could actually be beneficial.

Why? Because if they continue to invest a fixed amount of money every month regardless of what's going on in the market, as experts like Orman recommend, then they'll buy stocks at a lower share price than they can when the market is hitting a new high day after day.

This investment strategy is called dollar-cost averaging, and it's recommended to ride out periods of volatility, like now.

"Over time, your dollars — the cost of those shares — are averaged so that you always come out ahead," Orman previously told CNBC Make It.

In fact, Orman, author of "The Ultimate Retirement Guide for 50+," says investors should be "quite happy" if the market continues to go down. The worst thing to do at a time like this is panic and sell, she says, rather than take advantage of the lower share prices.

Berkshire Hathaway CEO Warren Buffett was also quick to remind investors that drops like Monday's are "good," and said not to make any decisions based on a single day's moves.

"You don't buy or sell your business based on today's headlines," the investing legend told CNBC's Becky Quick on "Squawk Box" on Monday. "If it gives you a chance to buy something you like and you can buy it even cheaper, you're in good luck."

Buffett noted that most people are "savers," and should be encouraged by the market's decline. "They should want to buy at a lower price," he says.

That said, investing always comes with risks. If the news has you spooked, then turn it off and stop checking the markets for a while. The only sure thing about the markets is that you won't able to time them, which is where dollar-cost averaging comes in.

"If it's the long run, don't sell, and continue to dollar-cost average," says Orman. "It's really just that simple."

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