Our world is a particularly scary place right now. The efforts to prevent a health pandemic are turning into an economic pandemic. For the foreseeable future, business activity will decrease, companies will fold, unemployment will rise, and headlines will continue to be scary.
So, Will and I have been buying stocks in our personal accounts as prices have decreased. When things feel the worst, it is the best time to invest. The stock market always recovers. I don’t know what tomorrow will bring. I can’t predict the short-term movements of the stock market. I don’t even attempt to predict where stock prices will be a day, month, or year from now. Warren Buffett wrote during the depths of the Financial Crisis, “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.” He must be licking his chops right now.
Fear is pervasive. Investors should be concerned about businesses with lots of debt or questionable business models. But this does not describe your portfolio. Your portfolio businesses will suffer profit setbacks in the short-term, but we think they will thrive longer term. Most businesses will generate record profits before too long.
Stocks will almost certainly outperform cash over the next 5, 10, and 20 years, probably by a wide margin. Despite this, some find comfort in selling stocks and sitting in cash. But there is a key fact that most people do not know. The S&P 500 averaged over a 6 percent return per year over the last 15 years, a span of over 3,700 trading days. But, if you attempted to time your buys and sells and missed the 20 best trading days, your return was negative. The long-term investor makes money over time. The desire to wait on the sideline until things feel better is understandable. But, all too often, it causes one to miss these best trading days and results needlessly suffer.