“The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy and the leaks are turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
“I’ve been buying stocks.”
So wrote Warren E. Buffett—the world’s most admired yet least imitated investor—in a New York Times piece published on October 18, 2008.
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October 18, 2008 was a Saturday; the S&P 500 had closed the night before at 940.55. Five months later the S&P 500 was down to 677. Nearly every day in between, someone blogged the old man finally lost his touch. Today the S&P is trading above 1,300 and the bashers are nowhere to be found.
What Mr. Buffett was explaining is that periods of well publicized economical suffering have historically turned out to be rather good opportunities for equities. The distress in the markets often leads to wide spread panic selling which reduces prices for solid companies to attractive valuations.
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In just that sense, fear is the true friend of the long-term investor. When you are feeling the most fear—and everyone around you is reflecting that same heightened sense of fear—have historically been the worst possible times to give in to, and to act upon, that fear.
You have a choice. You always have a choice. Believe the doomsayers, give in to the fear ... and wonder, a year or two later, what you could possibly have been thinking. Or choose to see fear as the driver of lower prices and therefore of increased values—a sale on the great companies—and prosper in the long run. Fear is your friend ... if you’ll let it be.
Shawn Miller is a fee-only, Financial Planner with Sovereign Financial Services in Bel Air, MD. Shawn provides advice to individual, businesses, and endowments. You can reach Shawn at 410.575.3120.
