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
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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