Global stock markets have taken investors on a wild ride since the beginning of the year and indications are that we are still in for more and possibly similarly large ‘bumps’ along the road as 2016 chugs along. The true long-term investor takes the recent market moves in stride and possibly uses the recent pull-back to add to high conviction positions.
While seeing the stock price of a Company you are invested in tank for two consecutive days (or possibly more) is definitely uncomfortable, its more likely than not the Company’s fundamentals have not deteriorated significantly enough to warrant exiting the position and crystallizing a loss. Use the recent pull back to add exposure to your stable of high quality companies at what could now be even more attractive prices…if you liked the Company at $30.00 and there has not been a fundamental change in the way the Company operates, the market it operates in etc…why wouldn’t you like it at $25.00 per share?
The following quotes from value investing guru Warren Buffett should help you sleep calmly at night as you take a long-term view on investing:
“Price is what you pay, value is what you get.”
“In the short term the market is a popularity contest. In the long term the market is a weighing machine.”
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.”