Monday, May 29

Warren Buffett’s Tips for Trading Volatile Markets: Patience Pays

The latest headlines and the indiscriminate fear of Fed rate hike It is a clear example of the reflection of Warren Buffett. Still volatile marketbetter take it with patience according Mitch Tuchman en MarketWatch.

The recent stock market volatility, following years of bull markets, is, however, the most predicted financial reversal in recent history.

Nothing we are seeing now should be surprising, or particularly dangerous for the prepared. But what about those who are not prepared?

when you see one massive sale In the stock market, always remember that there are two participants in each and every transaction: a seller and a buyer.

Yes, stocks can go down in value, particularly when some have been subject to disproportionate offers regarding your long-term final return. The price of a stock is, after all, a number today that tells a story about tomorrow.

Remember, though, that when some investors exit the market, others enter. As Warren Buffett said: “The stock market is a device that transfer money from impatient to patient”.

The unprepared are, by definition, impatient. They have invested too much in a small number of companies. They have bet heavily on unproven names. They have bought what Wall Street sells, which is action over intelligence, purchase over property, and blind greed over diligence.

“For perspective when stock market volatility increases, I refer clients to what we call our worry wall chart,” says Tuchman.

The table lists market returns since 1934 and events in the news during those years of gains and losses.

“If you take a few minutes to read it, year after year, it’s hard to avoid a simple truth about investing: wars, bubbles, credit defaults, pandemics, currency devaluations, inflation – none of this stops stocks from rising in most countries. of the years,” Tuchman points out.

Consider these three points:

  • For more than 100 years, stocks have doubled roughly every eight years.
  • A dollar invested 50 years ago in the S&P 500 is worth more than $100 today.
  • There is no five-year period in which the S&P has not posted a positive return

Can you wait up to five years for the stock market to break even and give you the return you seek? Great, you’re an investor.

No? So you shouldn’t be investing at all. To quote Buffett again, “If you’re not willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”