In Warren Buffett’s message to Berkshire Hathaway’s shareholders in 1986, he penned what would become one of the most famous quotes in the investing world:
“be fearful when others are greedy and to be greedy only when others are fearful”
Over the past more than 35 years since he penned that statement, it has been quoted endlessly – as this article is testament to. I believe it is because of how simple the message is.
One thing I’ve always thought (and could be wrong about) is that the quote was never meant for retail investors.
Source: Berkshire Hathaway
His statement clearly qualifies that this is how he thinks about it, rather than how he thinks retail investors should invest.
However, over the years, it has been introduced as a method for layman investors to decide whether it is a good time to invest. As intuitive it may sound, though, it feels unbelievably difficult to execute on. For starters, when other are fearful, we would be very fearful ourselves! That’s because fear only sets in when markets are in turmoil, making it very difficult for anyone to decide it’s a good time to buy stocks.
Should Investors Be Greedy Or Fearful Now?
In the current climate, there’s also a more abstract problem. I find myself wondering, should I be greedy or should I be fearful? The answer, of course, must be based on whether “others” are feeling greedy (then we should be fearful) or fearful (then we should be greedy) right now.
As a proxy for how others are feeling, I look to my own emotions. Right now, it’s quite a scary landscape to invest into. I can list a bunch of macroeconomic concerns in the markets, many of which may be interlinked:
COVID-19 has not magically gone away
There’s runaway inflation around the world
Interest rates are climbing at unprecedented levels
The global supply chains continue to be disrupted
There’s a war going on in Ukraine
China’s growth is appearing to slow down after 30+ years
Oil and gold prices are rising towards all-time highs
Looking at the stock markets itself, Chinese stocks have been battered, U.S. tech stocks have come crashing down, REITs and property stocks are suffering, the strong Singapore Dollar has caused investments with overseas exposure to be affected, and more.
In short, I am quite fearful today.
Paradoxically, because I (as a proxy for “others”) am fearful, is this actually a good time to be greedy? Or, because I think I should be fearful, and hence I am actually greedy, is this a time to be fearful?
Even if you don’t understand the sentence above (which admittedly verges on gibberish), one thing is clear – that whether we should be greedy or fearful right now is unclear.
A Potential Solution: Investing In The Markets Regularly
Since it’s impossible to decide whether now is the time to be greedy or fearful, the logical choice is to invest regularly, no matter what. If the market continues to fall, we continue to invest at lower prices (and buy more). If the market turns up, then we continue to invest at higher prices (and buy slightly less).
To be clear, this is not a new strategy at all. Dollar Cost Averaging into the markets is a very common investing strategy to avoid market timing. Something which Warren Buffett is definitely much better at than us retail investors.
If we are more confident, we can execute a regular investing strategy on our own. If we’re not, we can take advantage of investment solutions that already exist in the market. One such solution is by Endowus, which encourages investors to invest regularly as well.
One article I enjoyed reading from Endowus details how the “worst investor in the world” would have fared if he regularly invested $100,000 in the worst possible timing – right before a market crash in each of the past 40 years.
As we can see in the chart created by Endowus below, even the worst investor who regularly invests in the market over the long-term will be able to grow his/her money over time. And hence, the title of the chart, “Time in the market (not market timing)” matters.
As a fee-only wealth advisor, Endowus believes that investment costs are a major factor in growing our investments over the long-term. Firstly, they provide unique low-cost access to best-in-class funds globally. Endowus does not charge a sales fee, and also rebates 100% of the trailer fees that they receive from their partners back to us.
Based on our risk assessment, Endowus creates a personalied portfolio for investors. It also encourages us to invest regularly. While we need to make a minimum initial investment of $1,000, we can invest as little as $100 subsequently – which we can choose to do monthly to benefit from dollar cost averaging into the markets.
Since it was first launched in 2018, Endowus has also expanded its range of investments that we have access to on its platform. If we prefer, we can also invest our CPF and SRS with them. In addition to its personalised portfolios, Endowus also gives us access to other investment solutions, such as its income portfolio, ESG portfolio, thematic satellite portfolios, cash management account and more.
Invest Better With Endowus
If you’re interested to start investing with Endowus, you’ll be happy to know that DollarsAndSense readers can enjoy $20 off their access fee (equivalent to $10,000 advised free, assuming an access fee of 0.40%). Sign-up using this link to claim this special offer. Terms & Conditions apply.
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