A few of us were looking forward to seeing the stock markets recover during the last quarter of 2020, which started only 12 days ago. But as we are moving into the 38th week of this year, there is little reason to believe that the markets will start to rise again any soon.
Many businesses have been scaled down, people furloughed, budgets cut, investments deferred, assets repurposed. A vaccine for the virus seems still far off, but even if we would get it tomorrow, it will take more than a few months to get to where things were before. How long? Nobody knows.
Be greedy when others are fearful
Following the advice of Warren Buffett, investors should get greedy when others are fearful. The meaning behind this is of course that when stock prices are in free fall, it usually is a good time to be looking out for good bargains. But is the market now really already fearful? Is it a good time to be looking out for bargains?
The truth is that nobody really knows. Some shares may fall again. Others may rise. Some may be easier to analyze than others. But the universal rule remains valid in good and in bad times: There is no such thing as a bad time to invest in good companies.
My approach during this time remains the same as previously. I keep investing. I am buying companies that I believe to have a solid business, that will survive the current and future challenges, that continue paying dividends, and which I believe to continue doing all this for years to come.
While looking for the right companies at a good price, I also stick to my split-investment strategy. I am not putting all my money immediately into one stock, but invest only a limited amount first, and add to the position again a few months later on.
Following this strategy, I may not fully benefit from a stock price increase, but I limit my risk and have the opportunity to purchase more shares at a lower price in the event the stock price may fall.
Being greedy has never been good advice. Not being scared and having a strategy is in my opinion a better approach.