Warren Buffett, a rock star in the world of investing, has noticed the pattern of panic in the stock market recently and is using this volatility to his advantage. I am still buying into the market; the only change I’ve made is to buy more stocks, even if I don’t get the price at the lowest point on the curve.
Buffett is filling up his personal portfolio with American stocks with the goal of having an asset allocation 100% in equities in a short time. He sees fear in the market now, and he is sticking to a mantra that has worked well for him throughout his life: “Be fearful when others are greedy, and be greedy when others are fearful.”
You might think it would have been impossible for an investor to lose money during a century marked by [a gain of 17,320% in the Dow]. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.
This is an opportunity that comes around only once every few decades. If you want to have the long-term gains that financial advisers claim stocks can provide, you have to buy low and sell high rather than buy happy and sell afraid.
Updated January 16, 2010 and originally published October 17, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.