Worrying Too Much About Stock Market Fluctuation




I know we worry about myriad of issues concerning stocks market because it affects our portfolio value day in day out. Our heartbeat increase when we look at the news headlines about “ trade war “ , “Interest rate increase “ , “ EM slow down” , “US Mid-term election” , “Sanction on Iran “ etc..
But should we press our panic button to “ buy or sell” every time we saw these news headlines which cause the market to fluctuate up and down ?

Read this before you make a hasty act on trading your stocks base on News Headlines .

Buy American. I Am. By WARREN E. BUFFETTOCT. 16, 2008


“A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.


Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.
Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.



<Image credit:stockmarketalmanac.co.uk>


 From the chart, you may notice that market rebounded crisis after crisis, a 40+% dropped during GFC looks like a “small blip” along the chart , of course the emotional stress and pain during the crisis were tremendous and unimaginable , seeing your portfolio value downed by almost -40%. 

Fortune lost especially for those on speculative or “margin trading” and the world see “wealth transferring “ from one to the other. Investors who are lucky enough and have “gut” to buy during crisis will be rewarded handsomely in subsequent 10-20 years.


F.O.C ( Fear Of Crisis ) vs F.O.M.O ( Fear Of Missing Out)


Cheers !




“The investor’s chief problem—and his worst enemy—is likely to be himself. In the end, how your investments behave is much less important than how you behave.”
Benjamin Graham








PS: Some may be wondering or asking “Are we in the crisis mode now? ”. Definitely “No” as we are still far from 2008/09 kind of level, but for those in the process of “wealth accumulation “ phase , it could be a good opportunity to “buy on dip” since your “investing horizon” is long enough to see the rebound if there is any crisis.  For me , I will just stay put and doing some portfolio “reshufflings “ since I am already +70% vested.


Comments

  1. LOL! He said to buy American, not S'porean or Asian or EM :)

    Btw, he hasn't bought any stocks or businesses for 2 years liao --- too expensive for him.

    In the latest quarterly report, he gave up trying to buy stocks & instead used 0.8% of Berkshire's warchest to buyback its own stock.

    ReplyDelete
    Replies
    1. Hi Unknown,
      Yah, do understand the message was written in 2008 during the GFC , point I would like to put across here is investing for the long run and avoid the market " noise ".
      Yup.. Berkshire is sitting with more than +100 bil , waiting for good opportunities to buy at bargain ..
      Cheers !! :D

      Delete
  2. A timely reminder to act rationally amidst the recent market sell-off.

    ReplyDelete
    Replies
    1. Hi The Boy Who Procrastinates,
      Thanks for the comments ... :D
      Cheers !

      Delete

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