If you are feeling stressed and worried over the stringent circuit breaker measures during this COVID-19 pandemic, you are not alone.
The current crisis is morphing into one that restricts our freedoms and robs us of what we used to freely enjoy doing.
The stock market has also experienced one of its fastest crashes in recent history.
If you were invested, the value of your stock portfolio may have shrunk considerably.
It’s not pleasant. It hurts.
But like life as we know today, we cannot delve too long on what could have been. Instead, we have to find the courage to keep moving forward.
If you struggle to find some sort of guidance in the stock market, look no further than Warren Buffett.
The well-known value investor has numerous pearls of wisdom to help you get through this crisis.
Here are three of them worth remembering.
“Remember that the stock market is manic-depressive”
Warren Buffett’s mentor, the late great investor Benjamin Graham, was widely acknowledged as the father of value investing.
Among Graham’s most important lessons was to liken the stock market to an imaginary character called Mr Market.
In this context, Mr Market was very obliging and will happily allow you to either buy or sell your shares through him.
However, Mister Market is prone to wild mood swings.
Sometimes, he would feel happy and optimistic, and offer to buy your stake at a high price.
At other times, he may be moody and pessimistic and sees nothing but trouble and turmoil ahead. During such times, he will offer a very low price to buy over your stake.
Buffett reminds us that the stock market, like Mr Market, can swing like a pendulum between extreme optimism and extreme pessimism.
Right now, Mr Market is having one of his temper tantrums and is only willing to offer low prices for most of the companies out there.
But it is your decision as to whether you want to transact with him.
As an investor, you are under no obligation to accept any deals with Mr Market. It is your job to transact with him only when prices and valuations are in your favour, and not to get influenced by his manic-depressive behaviour.
“Invest for the long-term”
News headlines have been dominated by nothing but news of COVID-19’s rapid spread and reach around the globe.
During this time, it’s easy to lose sight of the long-term and be overly focused on the blaring headlines.
It’s true that companies will suffer in the short term from the effects of economic crises and downturns.
This suffering is inevitable as businesses are inextricably tied to the health of the economy and are dependent on consumer spending.
However, many great businesses experience short-term hiccups but go on to do very well over the long-term.
Investors should set their sights on the long-term and ignore short-term price fluctuations.
You can sleep much easier when you learn to ignore the blinking ticker movements and, instead, focus on the long-term business growth of the companies within your portfolio.
“Buy wonderful companies”
Great companies can manage adversity and hardship much better than weak, mediocre ones.
Buffett’s advice is for us to focus on accumulating wonderful companies that are run by competent, able management teams.
Such companies have sturdy balance sheets with a pile of cash that allows them to weather a prolonged crisis.
Wonderful companies allow you to sleep better at night without worrying if the business may go bankrupt, or face a sudden cash call.
Management in well-run companies is adept at allocating capital to obtain the highest returns.
During severe crises, the cash on these companies’ balance sheets can be used to scoop up companies on the cheap.
These acquisitions help to further cement the company’s market position and ready it for even stronger growth once the crisis abates.
Get Smart: Listen to sagely wisdom
Warren Buffett is not known as the world’s greatest investor for nothing.
His timeless investment advice will stand us all in good stead to weather any crisis, including the current pandemic.
So, dear investor, it’s time to perk up your ears and take his sagely advice seriously.
These nuggets of wisdom will enable you to navigate the COVID-19 crisis and emerge unscathed.
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