You can still take advantage of tremendous long-term buying opportunities when the market sells off again.
A decade from now, we very well may look back and say that the first week of March 2009 was the best week to buy shares in more than a generation.
That Tuesday, following the US government announcing another bailout of AIG, the FTSE 100 Index fell another 3% to 3,512 -- marking a 48% drop from the July 2007 highs.
On that same day, the FTSE 100 broke through the psychological barrier of 3,500. This was apparently too much for many investors to bear. Over the following week, and news stories were rife with capitulation from analysts. My favourite lines included:
- "It's like an unending nightmare."
- "Why should I step out in front of a train?"
- "This is the time for hysteria."
Even the slightest contrarian investor had to perk up at such blatant bottom talk. If there was ever a time to buy when there was blood in the streets, that was the week to do it.
Pigs Get Slaughtered
Fast-forward just a few months. The FTSE 100 is now up over 33% off its March lows. The biggest winners include:
Since that first week in March, we've seen a number of positive signs from the market, including banks like HSBC (LSE: HSBA) and Lloyds Banking Group (LSE: LLOY) beating analyst estimates and offering better forward guidance.
But Let's Not Get Too Excited
Yes, this is only a five-month period, and yes, we could certainly see more volatility in the market in coming months. But this simple example is a stark reminder to remain rational and patient while those around us lose their heads.
With a little fortitude and a little cash, you can take advantage of tremendous long-term buying opportunities when the market sells off again -- and it will, but perhaps not back to March lows. So if you missed the chance to buy during the point of maximum pessimism, don't panic. If this market's taught us anything, it's that we'll have another shot to buy bargains if we just remain calm.
To get started, begin compiling a list of shares you'd be happy to own for the next five years and beyond. Ideally, these will be companies that are:
1. Built to last 100 years or more.
2. Dominating growing industries.
3. Led by committed and proven management teams.
4. Governed by the highest corporate values.
5. Consistently increasing shareholder value.
The very latest recommendation from Motley Fool Champion Shares is a company that could fit the bill. It's has seen stellar sales growth in recent years, without the benefit of any acquisitions. A recent profit blip gives the chance to buy in at a cheap price. The next Champion Shares recommendation will be published next week, on August 12. To get instant access to all Champion Shares recommendations, a free 30-day trial to the service is yours. Just click here to get started.
More on the economy and the markets:
> A version of this article was originally published on Fool.com. It has been updated by Bruce Jackson, who does not have an interest in any of the companies mentioned in this article.
