Advice from Warren Buffet for Difficult Times
Posted on Thursday, June 26th, 2008 | In Investing LessonsThere is an alleged ancient Chinese curse, “May you live in interesting times.”
While there is no historical proof of the origin of that curse, there is ample current proof in the securities markets that we are living in interesting times. It’s simply nasty out there — or at least it feels that way.
The image shows the year-to-date performance of six key asset classes:
- US Total Stk Mkt (VTI)
- Non-US Developed Stk Mkts (EFA) - excludes Canada
- Emerging Markets (EEM)
- US Equity REITs (VNQ)
- Commodity Basket (DJP)
- US Aggregate Bonds (AGG)
Commodities are up, REITs are up but rolling over, and everything else (stocks and bonds) is down.
Click image to enlarge
That made us think about advice from Warren Buffet for difficult times. Here are some of his comments that may be relevant as investors watch wilting portfolios:
Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.
Our favorite holding period is forever.
If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. … buy a cheap index fund and slowly dollar cost average into it.
We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.
The stock market is a no-called-strike game. You don’t have to swing at everything – you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’
Clearly, Warren Buffet did not mean that if you hold a poorly designed portfolio you should hold forever. He means that if you used good judgement and had conviction when you invested, you should not be troubled by storms, which are always followed by sunshine.
Richard Shaw
QVM Group LLC
Last 5 posts by Richard Shaw
- Hoped for Stocks Bottom Pierced - November 19th, 2008
- Monitoring Ten Major Asset Categories - November 18th, 2008
- US Capital Markets Composition - November 17th, 2008
- US Stock Market Equity Allocation Weight - November 17th, 2008
- Lower Prices Now - Massive Inflation Later? - November 12th, 2008
ancient chinese curse, Asset Classes, Equity Reits, Investing Lessons, Investment Community, stocks and bonds, Warren Buffet
 About Richard Shaw (http://www.QVMgroup.com)
Richard is a principal of QVM Group LLC, a fee-based investment advisor based in Connecticut with clients across the country. He provides investment coaching to "do-it-yourself" investors, and manages portfolios for those who prefer not to make their own decisions. His investment approach is based on value, asset allocation, benchmarking, expense control, risk management, customizing portfolios to each client's specific circumstances, and regular communication about strategy and performance. The QVM Group team also provides municipal refinance services, strategic business planning and financial analysis service for new ventures, private acquisition analysis, and custom investment research. Richard's extensive experience, includes serving on the Board of Directors of Aberdeen Asset Management PLC (London Stock Exchange: ADN), membership on the Board of Directors of Phoenix Investment Counsel (renamed Virtus Investment Advisors), a U.S. pension manager and investment advisor to the Phoenix Funds (renamed Virtus Funds), as well as serving as Managing Director of a series of offshore investment funds based in Luxembourg. He has led institutional asset management sales and had overall responsibility for management of a U.S. mutual funds broker-dealer. He was a charter investor and member of the Board of Directors of several internet companies, including Lending Tree prior to its IPO. He is a graduate of Dartmouth College. QVM Group LLC is a Registered Investment Advisor. Visit the QVM Group website http://www.qvmgroup.com/QVMinvest/ |
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