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Stock market volatility: What would Warren Buffett do?

By David Norton - April 15, 2020

These are uncertain times.

Nearly everyone has had their lives disrupted in some way or other.

We’ve seen huge swings in the markets because of this.

You may be feeling uneasy, perhaps confused.

And uncertain about how this impacts your financial future.

Market volatility, like we’ve seen recently…

Can test even the most confident investors.

For some, though, they understand the opportunity this presents.

Of course, I’m aware not everyone can afford to invest right now.

Some people may be focussed on paying the bills and establishing an emergency fund…

And that’s okay.

But for those with spare cash and long-term investment horizons…

Investing now when shares are on sale just makes absolute sense.

You’ll capitalise on the eventual recovery and growth.

In 2008, when global stocks were falling, Warren Buffett said:

“The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary. So … I’ve been buying American stocks.”

Had you purchased a simple S&P 500 index fund on the very same day Buffett did…

You would be up more than 220% right now.

And that includes the recent sell-off.

Now you may argue that markets could fall even further…

So why invest now?

Why not wait?

Markets are driven by trends and psychology in the short-term so it’s possible stocks continue downward.

But no one knows for sure.

No investor has ever had complete clarity about the path markets will take.

There are far too many variables at play.

U.S. stocks experienced the fastest bear market in history recently, falling 20% in just 16 trading sessions and closing down close 30% just two trading sessions later.

For the purposes of this blog, let’s assume the markets continue to tumble.

And we hit a bear market of more than 30%.

That would make it one of the worst bear markets in history.

worst bear markets in history

Considering half the world is currently in lockdown and millions of businesses are halted…

Things are not likely to drastically improve any time soon.

But eventually they will recover.

(Even though it may not feel that way now).

Financial markets will come back and the economy will mend itself.

Returns following a bear market will be good if you remain disciplined and patient.

We’ve seen it before.

Wealth of common sense bear market returns

This may be a difficult time for you personally.

And as an investor, it is understandably challenging to watch the market’s uncertainty.

And to see your investment follow suit.

But nothing worthwhile ever came easy.

I believe this time is challenging our resilience personally, professionally and financially.

Those who persevere will come out stronger than ever before.

And if you’re finding it difficult to ride out the storm alone…

We’re here to help.

Our fiduciary duty to you is more important than ever during times like these.

Times when you need someone in your corner to help you stay the path…

Keep you focussed on your financial goals….

And reassure you that you’re in safe hands.

So when you’re ready, give us a call and let’s see how our chartered financial planners can help.

In the meantime, stay safe.

Try to steer clear of negative headlines.

Spend time with your loved ones.

Focus on developing yourself, your career and your future.

And hopefully you’ll come out of this more confident…

More in control…

And with greater clarity and purpose.

Save and invest for a better life