Another reminder, as Chris pointed out up above, that we invest in companies, not markets. And we’re not investing for next week, but for the coming years.
I think you guys are doing yourselves a huge disservice with all the fear mongering. Very little has changed in the grand scheme of things, and I doubt the problems the market is obsessing over will have a meaningful impact broadly (China, which is a teeny fraction of U.S. GDP, and low oil, which should be broadly neutral to positive for the U.S. economy overall). Market declines are a chance for all the bears to come out and get their 15 minutes (and the media is thrilled to accommodate them, of course, as people pay close attention when they’re afraid – and that equals big advertising dollars).
Now there are people on this board talking about recession, and about multi-decade economic stagnation like Japan experienced. Even though none of the facts point in that direction. And all just because the market is down? Folks, the market is insane. Yes, someday there will be a recession – that’s inevitable. And sure, the market may decline ahead of it. Even a broken clock is right twice a day. That doesn’t mean every market decline foretells recession. We had a significant decline in 2011 (two significant dips, in fact), and we’ve all done just fine since then.
Speaking of 2011, does anyone even remember those dips? Do you feel like your portfolio was permanently damaged because of those dips? If you rode them out, they were a non-event (though let me remind you that it didn’t feel that way at the time). And if you took advantage of them, that worked out very well for you.
As Morgan Housel has pointed out multiple times, there’s a paradox of investing: current and future dips always look like big risk in the moment, but past dips look like wonderful opportunities to setup a portfolio for long-term outperformance.
I recommend doing your future self a favor and look at what’s going on as future opportunity rather than present risk. Ultimately, prices are driven by fundamentals. The best opportunities arise when the market becomes so irrational that prices and fundamentals radically diverge in our favor, and that’s what we’re now seeing for many of the companies discussed here on the board (and that’s just a tiny sample of what’s available, of course).
And sure, prices can continue dropping, and even better opportunities may arise before things eventually turn around. But you don’t have to be perfect to do very well over the long run.
I’ve seen a number of posts over the years with people kicking themselves at not investing more during the financial crisis. While the market itself isn’t anywhere near that level of drop, some of our individual companies have certainly seen their prices drop by over 50%. Some are trading at or below valuations we haven’t seen for many years.
Market drops are perfectly natural. Bear markets (which we’re not in yet) are perfectly natural. Take a step back, consider the facts, put your long-term financial goals into perspective, and take this drop for what it very likely is: long-term opportunity.