The last month in the stock market has been a very wild ride. Remarkably, the recent decline has been the steepest in the history of the stock market with it dropping 30% in a mere 22 days as compared to the 250 days a 30% pullback took during the financial crisis.
As our firm’s investment guru Alex Bates recently asked: “Just compare this to 2007, when the financial system was imploding. What’s worse, a slow burn or a gut punch?”
It’s human nature to get caught up in the fear and greed of the stock market as it moves up and down. Large down moves like the last month are really tough. As I wrote in a recent Forbes piece, big drops in the stock market can trigger our fight or flight response.
To help combat these worries, below are quotes from investment greats with some timeless advice:
- “The four most dangerous words in investing are: ‘this time it’s different.'” -Sir John Templeton
- “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” -Warren Buffett
- “In investing, what is comfortable is rarely profitable.” – Robert Arnott
- “The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
- “The real key to making money in stock market is not to get scared out of them.” – Peter Lynch
- “The markets are unforgiving, and emotional trading always results in losses.” — Alexander Elder
- “We need to stop pretending that we can divine the future, and instead concentrate on understanding the present, and preparing for the unknown.” — James Montier
- “If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get.”-Charlie Munger
- “Large price changes tend to be followed by more large changes, positive or negative. Small changes tend to be followed by more small changes. Volatility clusters.” -Benoit B. Mandlebrot
- “The time to buy is when there’s blood in the streets.”-Baron Rothschild
- “In bear markets, stocks return to their rightful owners.”-Old Proverb
- Only when the tide goes out do you discover who’s been swimming naked. – Warren Buffett (We’re seeing this in spades as investors without sufficient liquidity are panicking and overpaying to get into cash)
- “The investor’s chief problem—and his worst enemy—is likely to be himself. In the end, how your investments behave is much less important than how you behave.” -Benjamin Graham
- “The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has.” -Jack Bogle
- “History provides a crucial insight regarding market crises: they are inevitable, painful and ultimately surmountable.” -Shelby M.C. Davis
- “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” -Warren Buffett
Finally, Bob Farrell’s 10 Investment Rules
They are all gems, but this one is visionary:
“The stock market is a device for transferring money from the impatient to the patient.”
– Warren Buffett