Stock investing is an emotional endeavour at the best of times. It’s particularly hard to stay neutral when bear markets are ripping the heart out of your investment portfolio.
Many are finding it hard to resist selling everything they own, swallowing their losses and heading for the hills right now. To these people, the thought of not only deciding to sit tight, but taking the opportunity to go on a dip-buying spree, is the thing that only the maddest of the mad would do.
This is where the successful investors stand out from those who generate mediocre returns. It can be hard to dampen your emotions and quieten the little voice in your head imploring you to ‘sell, sell, sell’. But it’s always those individuals who remain calm and logical who win in these situations.
At times like this it pays to listen to what the experts have to say. And words from Mark Walker, managing director of Tollymore Investment Partners, should help to soothe your nerves. He said today: “Investing is not easy, not cosy and at times very uncomfortable. [However] if it doesn’t feel uncomfortable, you are acting consensually, and you are destined for average investment results. The only way to navigate these periods with sanity and resilience is to have a very long-term view.”
Walker has the data to back up his glass-half-full take on the situation, too. He said that “the median market performance two years after a correction is 45%”. He added that “investing into corrections is how long-term investors perform better than macro traders and market speculators.”
It often pays to take the plunge if you believe in a stock’s investment prospects over the long term in bearish times like these. The Tollymore MD added: “It does not mean that if you invest today the market will not go down further. And if the market declines further it does not mean investing today was the wrong thing to do…. It just means you didn’t pick the bottom.”
More Sage advice
Going on the offensive,when everyone else is losing their heads and selling everything in sight is a critical way to make big returns. It’s one of the reasons why a great many ISA investors have managed to make a fortune down the years.
As the so-called Sage of Omaha, Warren Buffett, said: “Be fearful when others are greedy and greedy when others are fearful.” Admittedly, it’s not a strategy that always pays off. After all, Buffett’s decision to buy Tesco shares when they collapsed back in 2012 is considered (by his own admission) to be one of his biggest professional mistakes.
You don’t become one of the world’s wealthiest men by accident or by making poor decisions. Buffett’s personal wealth of $73.7bn (according to Forbes) suggests that this is a man that certainly knows what he’s talking about. And fortunately there’s a galaxy of great stocks that look massively oversold today and thus ripe for some dip buying. So get busy investing, I say, and realise your long-term investment goals.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.