The wisdom of great investors #1

The wisdom of great investors #1

“A market downturn doesn’t bother us. It is an
opportunity to increase our ownership of
great companies with great management at
good prices.”

 

Warren Buffett
Chairman, Berkshire Hathaway

 

In this first of a series looking at the wisdom of great investors, we focus on market corrections and how they can be an opportunity for the patient, long-term investor.

Market corrections are an inevitable and frustrating part of any long-term investment journey. How you react to them can greatly affect your investment results.

This is illustrated below using the results achieved by three hypothetical investors who each invested US$10,000 at the market’s highest point prior to the 2008 market downturn:

Investors who kept their emotions in check have built more than twice as much wealth; however, fear and greed can cause investors to rush in and out of the market at inopportune times.

If you are a long-term investor, when faced with a market correction do not react emotionally or abandon your investment plan. Be patient and, assuming your goals and/or time horizon have not changed, view the downturn as an opportunity to purchase good businesses at attractive prices.

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