Can a smart investor survive the crises?

Team Veye | 23 Mar 2020

Can a smart investor survive the crises?

Old adage “Sell when everybody is greedy and buy when they are fearful” has time and again proved to be true. Stock markets have invariably made up the losses in the months subsequent to crash.

It has been seen that when the market turns up, sellers are afraid to buy again. As a result, they lock in their losses. If you have sold during the crash, the human mentality says that you will not buy in time to make up your losses.

If the investors don’t panic and act smartly there is a very good chance that they not only recoup the losses when the market rebounds but also make money. Markets are galore with stories of such people who turned such market falls to their advantage.

Warren Buffet is known to have bought great companies at bargain prices. Many good companies are available at bargain prices during such times. Berkshire Hathaway’s fundamental strategy has been to identify valuable companies and then acquire increasingly large portions of them. Its portfolio is also full of more obscure successes too Like See’s Candy, which Buffett calls his “dream business. Buffett bought See’s Candy for $25M in 1972, and by 2019, it had brought in “well over” $2B — a nearly 8,000x return. His wisdom is fully reflected in his quote “Price is what you pay, value is what you get”.

Although nobody has a crystal ball to suggest the most opportune time, it is the time to identify such companies which have growth potential. Although the picture looks gloomy at such times, with negativity around, it is just the right time to hold your nerves. There could be many stocks and sectors where panic selling has happened irrespective of valuations. 

Smart investors never buy a stock just because it is cheap. They ignore the short-term movements but not the value of intangible assets. The recent crash is rare in the sense that almost every class of assets has fallen like shares, property, and commodities including oil. Maybe, it could turn out to be a once in a lifetime opportunity too.

 

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