As the plausibility of a bear market continues to grow, I thought it would be useful to consider ways that we could react, should the
market take a turn for the worst. Even better, let's let Warren Buffett do it. Here are some quotes of things he's said over the years that I think can give any of us at least a few reasons to rest easy.
1. "If a business does well, the stock eventually follows" In other words, regardless of the circumstances of the market at large, you can still look for good companies.
2. "If past history was all there was to the game, the richest people would be librarians" So don't rely too heavily on the past. If we do enter a bear market, it may not be anything like other bear markets. Creative thinking and prudent planning going forward is what could reward you more than what relying on history will.
3. "In the business world, the rearview mirror is always clearer than the windshield" This goes well with #2. What lies ahead is by no means clear. Even so, you shouldn't let the clarity of that rearview mirror discourage you from moving forward anyways.
4. "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price" If this is so, then all we have to do is find wonderful companies. The pricing right now might do half the work for us.
5. "Let blockheads read what blockheads wrote" If you find that you're reading the same garbage day in and day out, read something else. Like this blog .
6. "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it" If we do in fact see some serious slides in the market, and they are indeed folly, don't slide with them. Profit by using these times as a rare buying opportunity of the first magnitude.
7. "Only when the tide goes out do you discover who's been swimming naked" In other words, don't be naked. The tide just might be going out. Also, don't buy companies that are naked. If they are naked, and the economy does start to slide, guess what we're going to see?
8. "Risk comes from not knowing what you're doing" If you feel like there is lots of risk right now, try something new. Look for different kinds of companies than you would otherwise.
9. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful" In other words, do it the Berkshire Hathaway way. If everyone around starts looking fearful, go get your greed on.
10. "Wide diversification is only required when investors do not understand what they are doing" Don't be scared away from stocks. If you feel like you need incredible breadth in your portfolio to "weather the storm," try weathering it another way: look for what you know. Look for companies being sold at discounts. There is bound to be many.