Savage market declines are normal.
The difference between great and poor investors is how they deal with fear.
Every major news outlet is flashing Coronavirus.
Panic is everywhere.
But, as Warren Buffet said . . .
“Fear is the foe of the faddist, but the friend of the fundamentalist.”
The Real Meaning of FEAR
An astute investor once told me the real meaning of fear . . .
- False
- Education
- Appearing
- Real
We see a headline like . . .
“U.S. Virus Plan Anticipates 18-Month Pandemic and Widespread Shortages,” The New York Times, March 18, 2020
. . . and the next thing you know the schizophrenic investor freaks out!
“Why did they sell, coach?”
They freaked out.
“Why did they freak out?”
Because they chose to be guided by headlines rather than principles that have always triumphed in the past.
Investing by Principles
Chief among these principles was clearly stated by our 35th President.
“No problem of human destiny is beyond human beings.” John F. Kennedy
Why sell a portfolio of good stocks just because a virus could last 18 months?
Remember how the S&P stock index declined 19.8% from September 1 to December 24, 2018?
You don’t?
That’s right, that sudden savage 95-day decline ended on December 24, 2018, the worst Christmas Eve in market history.
Were you still strapped in with your stock portfolio on Christmas Day 2018?
If you were and stayed in, the Standard & Poor’s 500-Stock Index went up 40% the following year (add another 2% for dividends).
Like the previous 58 market corrections since 1946, the September 20-December 24 drawdown proved temporary.
And so we began the 59th market correction in the history of the S&P index on February 19, 2020.
Is there any reason to believe the Coronavirus correction won’t be temporary?
As long as great companies are tuned to the needs of an ever growing world population, their earnings will probably reward the patient investor.
What do you think?
Thanks, Steve for these helpful words. These are things I know, but need to keep being reminded of on a regular basis.
Me too Steve! Principles carry us through unreasonable emotions! Thanks for your comment!