5 must-see quotes
The recent sell-off in the wake of interest rate hikes and high inflation in global markets has left investors anxious.
The US Federal Reserve has been planning to withdraw support for the US economy since the start of the pandemic in March 2022.
Omicron has touched industries all over the world.
Tensions over the Russian threat to invade Ukraine – and the likelihood that the United States will retaliate with sanctions – pose another threat to the market.
It’s no surprise that investors are worried about geopolitical tensions, rising crude oil prices, supply chain constraints, inflation, the never-ending pandemic. They wonder where the market is going.
At times like these, it’s important to listen to what the renowned market gurus have to say.
Below are some quotes from legendary global gurus on current market trends and what to expect in the future.
1. Ray Dalio
“Trying to time the market is a wild ride”.
Bridgewater Associates president Ray Dalio in an interview last month said most people are simply ill-equipped to predict which stocks will rise and which will fall, and then invest accordingly.
Ray Dalio has a very simple analogy to explain the very concept.
According to the billionaire investor, trying to beat Usain Bolt in a run or Michael Phelps in the pool might be better than trying to time the stock market because it’s harder than competing in the Olympics.
Individual investors often fall into these same traps over and over again.
It’s easy to listen to those who say you should buy and hold long when you’re in a bull market, which we’ve seen for a long time now.
In fact, when the market starts to fluctuate, volatility increases. People are starting to panic. Sticking to your weapons becomes much more difficult.
From the start, investors should stick to their investment strategy when the market becomes volatile.
There are a lot of studies on how terribly you would have done if you missed the best 15 or 20 days in the stock market. You may have stayed invested for each of the remaining days for 10-15 years. But if you missed the best 15-20 days, your feedback would have been terrible.
This is why Ray Dalio advises you not to time the markets.
Ray Dalio is the founder of the world’s largest hedge fund firm, Bridgewater Associates, which manages $154 billion.
According to Forbes, Dalio has an estimated net worth of $20 billion as of January 2022, ranking him 88th on their list of billionaires and 36th on the Forbes 400 list.
2. Howard Marks
“Reducing market exposure through ill-conceived sells – and therefore not fully participating in the long-term positive trend of the markets – is a cardinal investment sin.”
So writes Howard Marks in his latest memo to clients of his investment firm, Oaktree Capital Management, titled “Selling Out.”
In the memo, Marks asks a very important question: why sell something that you think has a positive long-term future to prepare for a drop that you think is temporary?
Just because things are tough right now doesn’t mean you should liquidate your holdings.
Marks is of the opinion that you shouldn’t sell something just because it has gone up. He says investors tend to take profits on stocks that have gone up because they like to see theoretical profit converted into real profit.
However, this is a mistake because the investor will put both the principal and the profits back to work and end up taking the same risk.
Therefore, selling just because something has gone up is not the right way to go.
What about selling a stock after it has gone down a lot?
Again, selling for this reason is not a good idea. If you are panic selling, you are giving the buyer the opportunity to buy what may be an undervalued asset.
Therefore, the buyer outperforms at your expense and you end up with poor long-term returns. Therefore, selling just because something is down 40-50% from its highs is not the way to go.
He further adds, “Selling things that have fallen for no reason, turning negative fluctuations into permanent losses and missing out on the miracle of long-term capitalization”
When investors discover an investment that has the potential to accumulate over time, one of the hardest things to do is to be patient and hold the position for as long as is reasonable based on the yield and the expected risk.
The current thinking is highly relevant due to economic uncertainty as the world struggles to ignore the worst effects of the Covid outbreak while falling into an inflationary environment.
Here is one of the most important lines of his memo –
In other words, the decision to trim positions or sell entirely is a judgment call…like everything else in investing.
Howard Marks is a famous American writer and investor. He is co-founder and co-chairman of Oaktree Capital Management, the world’s largest distressed securities investor.
Howard Marks net worth is approximately $2.2 billion as of February 2, 2022.
3. Jeremy Grantham
“The current sell-off in stocks is eerily similar to the crash that triggered the Great Depression.”
Veteran investor Jeremy Grantham believes the current sell-off in stocks is “eerily” familiar with the Wall Street Crash of 1929, which sparked the Great Depression.
The Great Depression was a severe global economic depression that took place primarily during the 1930s, beginning with the United States.
The event wreaked havoc on Wall Street and wiped out millions of investors. In the following years, consumer spending and investment fell, leading to a sharp decline in industrial production and employment.
Grantham is quite bearish and thinks a US “superbubble” is about to implode.
According to Grantham, the sharp decline in some of the “fuzzy” areas of the stock market followed the pattern of previous blowouts, including the dotcom bubble in 2000.
Additionally, the recent global stock price boom has sparked debate about a likely stock market bubble.
Jeremy Grantham is a British investor and co-founder and chief investment strategist of Grantham, Mayo, & Van Otterloo (GMO), a Boston-based asset management firm.
The legendary investor is quite famous for his pessimism about the stock market in general. In the past, he made some notable calls, for example, the Japanese housing and stock market bubble and the rise and fall of the dot-coms of the 1990s.
4. Jeffrey Gundalach
“The stock market, and risk assets in general, have been buoyed for more than a decade by the expansion of the Fed’s balance sheet. As we move towards lowering and eventually raising interest rates, this is turning into rougher waters for the markets.”
Jeffrey Gundlach predicts “rough waters” for financial markets as the Federal Reserve is poised to accelerate the end of quantitative easing and proceed with interest rate hikes.
According to Jeffrey, over the past decade, the rise in markets and other riskier assets has been supported by the expansion of the Fed’s balance sheet.
To achieve its goals, the Fed uses a variety of programs and initiatives, which typically result in a change in the composition of the Fed’s balance sheet.
The Fed can change the amount and extent of assets and liabilities on its balance sheet, thereby increasing or decreasing the money supply in the economy.
However, Gundlach thinks the Fed’s decision to raise interest rates in March 2022 will hurt market sentiment.
Rate hikes are essentially a move towards normalization.
To combat turbulent financial markets and runaway inflation, the Federal Reserve could raise interest rates 3-4 times in 2022.
Jeffrey Gundlach is an American investor and businessman. He is the co-founder of the mutual fund company DoubleLine Capital, which manages over $140 billion in assets.
As of February 2, 2022, Gundlach’s net worth is $2.2 billion.
5. Seth Klarman
“During market downturns, momentum investors don’t find momentum, growth investors worry about a downturn, and technical analysts don’t like their charts. But value investing discipline tells you exactly what to do”.
Renowned investor Seth Klarman beautifully explains the situation that unfolds during the stock market crash.
Klaram strongly believes that whatever strategies an investor adopts during a stock market sell-off, they generally fail to produce returns, with the exception of value investing.
According to Seth Klaram, value investing requires a lot of hard work, exceptionally strict discipline, and a long-term investment horizon.
While dynamic investors follow a short-term approach. Despite high positive average returns across a wide range of asset classes, dynamic strategies can suffer from unexpected and prolonged chains of negative returns.
Currently, value investors are gaining prominence on Wall Street as growth stocks face continued volatility due to rising inflation and tighter monetary policy.
Seth Klarman is an American billionaire investor, hedge fund manager and author. In addition, he runs the Boston-based company Baupost. With $30 billion under management, Baupost is one of the largest hedge funds.
Klarman is an expert in value investing. Interestingly, his book “Margin of Safety”, a cult classic among investors, sells for up to $2,500 on Amazon.
The bottom line
When markets are volatile, most people don’t know where to start when it comes to investing.
Fortunately, we can learn and gain knowledge from these great investors. The investors mentioned above have nearly two decades of experience in their respective fields.
If you’re nervous or scared about investing in the stock market due to a recent correction, check out these quotes for reassurance that you’ll be fine in the long run.
As an investor, you should try to live your life according to these philosophies to get better returns.
Being a successful investor like them requires spending time, learning about companies, reviewing financial statements, researching investment strategies, and identifying reliable resources.
Warning: This article is for information only. This is not a stock recommendation and should not be treated as such.
(This article is syndicated from Equitymaster.com)
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)