Being greedy when others are fearful
Our timing might not be ideal, but we do believe that the fall of 2022 will turn out to have been a very good time to put cash into the stock market. Recommending stocks at a time like this is hardly revolutionary. In October of 2008 Warren Buffett wrote a New York Times op-ed entitled, “Buy American, I Am.”
The money quote:
“I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.”
Buffett’s short-term timing was “terrible”—the market fell another 26% by March of 2009. But below are the returns for stock investors who bought in October of 2008 when Buffett was writing, compared to those lucky few who caught the market low the following March.
|S&P 500 Gains Including Dividends|
|October 16, 2008 to October 2022||438%|
|March 9, 2009 to October 2022||642%|
Obviously catching the ultimate low in March of 2009 would have yielded more than taking Buffett’s advice in October, but both dates proved to offer a great opportunity. Sitting on your hands in late 2008 was an epic mistake.
So anyone with cash today should start putting it to work. And buying stocks isn’t like buying a house—you don’t have to do it all at one time. Adding cash to a stock portfolio each month is a time tested way to end up with a very attractive average price paid.
But what if you’re already invested? We learned a long time ago that when calculating future returns, there is no difference between buying a stock today or waking up this morning with the same stock already in your portfolio. Buy a great company today or keep a great company today— there is no difference and you’ll be happy with the result when looking back.
Daniel A. Ogden