When investors encounter troubles and challenges on their investing journeys, nothing beats the soothing words of an investing expert to calm one’s nerves. Legendary investor Warren Buffett has a great collection of quotes that can help investors navigate through tough conditions.
I often find it useful to tap into the wisdom of the Oracle of Omaha (as he is known) in order to steady my thoughts, control my emotions, and stay the course. For investors who may be feeling worried, troubled, or pessimistic, these five quotes from Buffett himself should help you navigate rough seas successfully.
1. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
When investors purchase shares in a company, they should view it as part-ownership in a living, breathing business, not just a ticker symbol with a bouncing share price. In other words, the stock market itself should be irrelevant unless one seeks to purchase more shares of the same company. Investors, therefore, need to ensure they purchase a company that can stand the test of time and emerge even stronger 10 years later.
Take Singapore Exchange Limited (SGX: S68), for instance. This is a business with a strong competitive moat that I will be more than happy to own for a decade even if the stock market were to shut down.
2. “Remember that the stock market is a manic depressive.”
Investors should remember that stock markets are made up of a bunch of human beings’ collective decisions and views, and humans are naturally emotional creatures. When times are bad, people start to think the worst and fall into a pessimistic mood that can last for weeks, if not months. Such emotional roller-coasters are a natural part of investing and shouldn’t faze the calm and logical investor.
3. “Widespread fear is your friend as an investor because it serves up bargain purchases.”
While many investors may start running for the exits due to fear and trepidation, this is also a good time to realise that some companies may be trading at bargain-basement valuations as a result of these emotions running rampant through the market. When everything seems gloomy and despondent, valuations are often at rock-bottom, and investors can scoop up juicy bargains if they focus on the fundamentals of great businesses.
4. “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks.”
Trouble does crop up now and then, and for investors managing a portfolio of stocks, an economic downturn or recession may cause some of their investments to display deteriorating business fundamentals. In cases like these, having a logical thought process will allow you to re-deploy money invested in weak companies into stronger ones.
Remember that your job as an investor is to allocate your capital as efficiently as possible, and Buffett’s quote reminds us of the wisdom of doing so.
5. “Predicting rain doesn’t count, building the ark does.”
While it’s almost impossible to be able to predict when tough times will arrive, investors can certainly prepare themselves for such rainy days. Having sufficient cash resources, adopting a conservative mindset, and watching out for risks are some of the methods investors can use in order to tide through an economic storm. Preparation offers peace of mind and allows investors to sleep well at night even if tough times do eventually arrive.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange Limited. Motley Fool Singapore contributor Royston Yang owns shares in Singapore Exchange Limited.
Motley Fool Singapore 2019