There are many reasons for the stock market to experience significant declines.
Geopolitical – war, conflict, regulatory, trade sanctions;
Health & food – global pandemics, virus threats, threats to human life
Energy – fossil fuels: oil, gas prices
Economy – policy, interest rates, debt & default
And when you see the market decline, the pull to check the impact on your investments.
Remember its only paper unless you sell.
If due diligence has been performed, and their is substantial understanding as to why the investment is made, then many external impacts should not change the story and the reason for the investment.
To quote one of the most famous investors of all ‘Warren Buffett’: “My favorite holding period is forever”.
Moreover, it’s not easy to buy when the prices are terrible, and when one doesn’t know where the bottom lies – but to do so should be an investors greatest aspiration.
Up to mid February 2020 the S&P 500 was climbing steadily. in fact we were experiencing one of the strongest bull runs [stock market climb] of all times.
And then, the Coronavirus outbreak. By early March concern about the virus’ global spread took hold.
The, the all out oil war between the worlds largest producers the Kingdom of Saudi Arabia and Russia took hold.
Blame surfacing and climbing tensions between two super powers and the WHO.
The perfect storm? A global virus pandemic and the tanking price of oil?
What does this mean to you? The individual that works hard and wants to make their money work for them in the future…
Yet, all you see if you look at your pension and ISA savings is a decline for security [stock] related investments.
Firstly, don’t watch the market closely.
Holding onto investments over the long term is essential if you want them t pay off.
Money is made by investing in good companies over time.
The markets are always going to be volatile. That is their nature. Its time in the market, not timing the market that is important.
Here we take a look at the advice of headline investors who are worth a listening to.
Legendary investor Warren Buffet advises: “The best thing you can do is keep a level head.”
“If you buy good companies, buy them over time, they’re going to do fine 10, 20, 30 years from now”
Ray is the billionaire founder of the investment firm Bridgewater Associates.
Ray advises, “although it is tempting to sell when the market begins to drop, giving in to your fear is not a sound strategy,”
“You cannot possibly succeed that way.”
“You have got to do the opposite. It’s when you are not scared you probably want to sell, and when you are scared, you probably want to buy”.
That’s because the best times to buy and sell stock often goes against what may seem logical.
“The greatest mistake of the individual investor is to think that a market that did well is a good market, rather than a more expensive market. And that a market that is full of negative news and going badly is bad time to sell or buy.
Charlie, the billionaire investing partner of Warren Buffet of Berkshire Hathaway fame highlights his policy of ignoring short-term price fluctuations and reviewing his investment decisions on a long-term basis, saying, “We just keep our heads down and handle the headwinds and tailwinds as best we can, and take the result after a period of years.”
Investing is something that occurs over time. If you buy good companies and hold them over a period of time you will likely do just fine.
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