I make no attempt to forecast the market—my efforts are devoted to finding undervalued securities.
– Warren Buffett.
People who buy shares with the right fundamental approach need not be bothered by the market volatilities. Fundamentally, shares are nothing but a percentage of the underlying business. If the underlying business is not impacted in the long term; then the market going down should not cause you to sell any of your holdings.
Granted, with something like the current coronavirus scenario; most businesses will be impacted in the short term, say 6 months or 1 year; but if you bought stocks with a long term horizon (20/30 years or preferably, forever) in mind; then if the stock is down; you shouldn’t have to worry a bit. In fact, if you were smart enough to keep excess capital at hand (another expression for that is “keeping your powder dry”); then a stock market downturn, like the current one; may create significant buying opportunities; either of new businesses or to add to your current holdings.
On the other hand; if you bought shares with the wrong fundamental approach; then you everything to worry about and you shouldn’t have been in the stock market to begin with. Like, my favorite investor Buffett says, “When the tide goes back, we come to know who has been swimming naked”.
This whole episode brings up another lesson that I learnt painfully, in the 2009 crisis; never buy stocks on margin. In events like this, you may be liquidated; if you bought stocks on margin.
Yours’ truly is holding on to his securities in this market downturn and not selling anything; but he was not smart enough to have enough money on hand to capitalize on the opportunities that may have presented themselves with the recent turn of events. Well, like they say, you can’t win them all.