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%. It was expected almost across the board.

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. By the end of the day, the Dow Jones Industrial Average (^DJI 0.26%) was down more than 500 points, and other major indexes were down between 2.5% and 3.5% on the day.

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.

Top of Federal Reserve entrance, with eagle.

Image source: Getty Images.

A fast-changing narrative

Investors had been anxiously awaiting the Fed's decision. Most commentators believed that the Fed would remain stubbornly aggressive in its efforts to clamp down on inflationary pressures, accepting an economic recession if it managed to prevent expectations of permanently higher prices from becoming entrenched in the economy. Yet they hoped that the Fed would provide at least some signal that it wouldn't keep boosting rates indefinitely.

When the Fed statement came out, investors believed that they had gotten exactly what they'd hoped to see. Economists parse each written statement from the central bank word by word, and new language pointing to the Fed's intent to take into account the total 3.75 percentage points of monetary tightening it has enacted over the past year or so seemed to point to an eventual slowing of future rate hikes. That suited investors just fine, as they hoped it meant that the Fed would still support a growing economy and would potentially pivot from its steep trajectory of tightening.

Yet half an hour later, Powell's comments told a much different story. Powell admitted that a "soft landing" to stave off recession has become less likely, but that nevertheless he wouldn't shy away from doing what it takes to keep inflation at bay. The Fed chair went so far as to note that the consequences of tightening too much aren't necessarily all that bad, because the central bank has proven tools to stoke economic activity if a deep recession results from its policy actions.

Don't worry about day-to-day moves

The change in narrative and its short-term impact on the markets showed just how hard it is to trade with a short time horizon. Just when you think you have some key piece of information figured out, something unexpected happens to pull things in exactly the opposite direction. Unfortunately, similar things happen to short-term traders all the time, whether it's in a particular stock or in the market as a whole.

Long-term investors, on the other hand, can concentrate on the big-picture implications of the Fed's policy. The Fed's consistent message has been that it will do what it takes to bring inflation under control, and that negative short-term consequences are acceptable to preserve long-term financial stability. Every long-term investor wants that stability, and so the Fed remaining resolute in pursuit of it is good news.

In the meantime, investors with long time horizons are getting an even longer opportunity to make incremental investments at more attractive valuations. Sooner or later, market conditions will turn more favorable, and those who had the courage to invest in uncertain times will get rewarded appropriately. Until that day comes, though, the easiest thing to do is just to let the big intraday swings play themselves out -- and keep following the investing strategy that you've chosen to help you meet all your financial goals in the long run.