In early May I began nibbling on a few good companies, and I continue to do so. That’s been a
mistake. My plan before the correction had been to wait until after the bottom in the broad market to buy, but I didn’t follow my plan.
After the 2008 correction I analyzed my purchases and found that I would have been better off waiting to buy until the broad market had risen 10% off of its March 2009 bottom. I had nibbled in 2008, losing money.
Just a thought: did you take the right lesson from that experience?
Are you really that able to predict the market?
I’m not, and (like most) I think I’m much better than average.
If the things you’re nibbling on are expected to do well over 5 years given their valuation levels, why do you care that they were cheaper 3 months into the process?
Another possible interpretation of your previous experience:
You bought at a reasonable price.
The price went down some more, so you FEEL like you made a mistake.
But you didn’t.
Waiting till “after the bottom” won’t work, unless you can see the future.
The market rallied 27% from November 2008 till January 2009—then plummeted again to even lower levels.
So, even a very good test of “after the bottom” (end November) would have had you purchasing things that were at vastly lower prices in March.
Have a gander at Mr Buffett’s “Buy American, I am” op-ed piece October 16 2008.
Check the prices that day.
Was it a good time to buy? Yes, given subsequent returns over any time frame longer than about seven months.
Did the market go a lot lower for a short while? Sure. But nobody knew that for sure, no matter what they said.
Some observers were certain and ended up being right, but that doesn’t mean they knew the future.
I’ve been a buyer lately.
I actually believe the market, including the price of Berkshire, will be quite a bit lower at some point in the next year with high probability.
And I even have a bunch of statistical models to add a veneer of plausibility to that feeling.
But I’m a buyer now because I like the price/value ratios of the things I’m buying, given their respective tail risks.
If good investing is about keeping your eye on the ball, that’s the ball.