The stock market crash could not be over. In April the UK economy shrank by a record 20% due to the coronavirus pandemic.
Market corrections are expected to be fairly regular. But for many of us, this was the first time that investors saw the index crash.
In times like these, I like to turn to the advice of someone who has had multiple crashes and made much of his wealth out of stocks that nobody wanted at the time.
Be greedy
So far, the FTSE 100 has dropped by almost 17%. The index fell by 18% in March alone.
Like most investors who previously bought stocks, the possibility of a future global pandemic never occurred to me. Then the outbreak of the corona virus struck and the countries were faced with different levels of lockdown measures. Out of the blue, companies were hit in ways that were unthinkable in the past. Understandably, many people were scared and started selling stocks and shares.
When the stock market started to fall, Warren Buffett’s wise words rang in my ears: “Be scared when others are greedy, be greedy when others are scared”.
When the market index collapses, it takes a lot of trust to believe that stocks will recover. However, I believe it is worth remembering that the FTSE has fallen numerous times since it was launched in 1984. In the following years he always recovered. Why should it be different now?
Invest in the long term
It is also helpful to remember that investing in stocks and shares is a long-term thing. Nobody can predict how the economy will develop in the coming months or years.
If you invest with a time horizon of a few decades, short-term fluctuations should be seen better as an opportunity to buy high-quality stocks at bargain prices.
As Warren Buffett said, “Buy a stock the way you would buy a house. Understand and do it so that you would be happy to own it, even if there was no market ”.
When you buy a house, its future value may just be a secondary concern for you. I would see stocks and shares with the same perspective.
Keep your nerves in check like Warren Buffett
When the market collapses, it’s tempting to follow the crowd and sell your stocks. By doing this, however, you make every paper loss a realized loss.
Instead, it’s worth considering why you bought the stock in the first place. If the fundamentals have not changed, I would stay in my position.
Sometimes it pays to go in a different direction than the crowd. I like to remember this saying by Warren Buffett: “Consider the market fluctuations as your friend and not your enemy; benefit from foolishness instead of participating in it ”.
The next stock market crash?
At some point, the stock market is likely to crash again. Maybe this year, but maybe not. Nobody knows.
A stock market crash may not be a bad thing for long-term value investors. After all, there is not often an opportunity to buy shares in quality companies at a reduced price. If it does, it pays to be ready.
The post market slump: 3 lessons you can learn from Warren Buffett appeared first on The Motley Fool Germany.
This article was written by T Sligo in English and published on Fool.co.uk on 06/20/2020. It has been translated so that our German readers can take part in the discussion.
The Motley Fool UK has no position in any of the stocks mentioned.
Motley Fool Deutschland 2020
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