With many market participants continuing to fear a market sell-off, the reality that a correction or recession may be around the corner is something which should make investors cautious, but also excited, at the potential to buy specific securities at a discount to current valuation levels in the near to medium term.
Many of the world’s most iconic investors, such as Warren Buffett, have continued to beat the drum of being greedy when others are fearful, noting he has continued to invest in every market (bull and bear) over the past half-century, picking those he believes carry the greatest value in a given point in time.
The reality that Buffett, and many other investors, have slowed their pace of investment in recent years, choosing instead to build up a cash stockpile should not be surprising. After all, one of Buffett’s greatest pieces of advice, to be greedy when others are fearful, requires liquid assets to invest during times of distress.
Carrying enough “dry powder” during the good times to invest when the market turns is a difficult thing to do, as many investors will note that holding large cash positions will hurt short-term returns (cash typically earn negative net real returns, after inflation, over time).
That being said, one of the ways Buffett has continued to be successful in beating the market over time is being patient and waiting for deals to pop up. If he doesn’t see deals and believes others are being greedy, he will simply wait for fear to take over and buy at lower prices – a strategy every investor should consider.
Invest wisely, my friends.
