• Warren Buffett likes volatile markets because they translate into more buying opportunities.
• Berkshire Hathaway’s CEO dismisses the idea that volatility is a risk.
• Stocks are more volatile than cash or bonds, but they’re safer over the long term, says Buffett.

Warren Buffett welcomes volatile markets because they do good business, and short-term price movements don’t affect his long-term returns.

The billionaire investor and CEO of Berkshire Hathaway argued that it is safer to hold stocks than to hold cash or long-term bonds, even if stock prices move much more. He also ridiculed the use of

volatility

as a measure of risk.

Here are 8 of Buffett’s best quotes on volatility, slightly edited for length and clarity:

1. “As an investor, you like volatility. You like the idea of ​​wild swings because it means more things are going to be mispriced.” (1997)

2. “The true investor welcomes volatility. An extremely fluctuating market means that irrationally low prices will periodically be attached to strong companies. It is impossible to see how the availability of such prices can be seen as increasing risk for an investor who is completely free to ignore the market or exploit its folly.” (1993)

3. “It makes no difference to us whether stock market volatility averages 0.5% per day or 0.25% per day or 5% per day. money if the volatility was higher, because it would create more errors in the market, so volatility is a huge plus for the true investor.” (1997)

4. “Rotty markets are ideal for any investor – small or large – as long as they stick to their investment. The volatility caused by fund managers speculating irrationally with huge sums will offer the true investor more chances of making smart investments. He can only be affected by such volatility if he is forced, by financial or psychological pressures, to sell at inopportune times.” (1987)

5. “If the investor fears price volatility, mistakenly viewing it as a measure of risk, he may, ironically, end up doing very risky things.” (Buffett argued that holding currency-denominated assets such as cash or treasury bills, whose value is eroded by inflation over time, is riskier than holding stocks for the long term.) ( 2014)

6. “No one ever gets that in a private company, where you get a buy-sell offer from some party on a daily basis. But in the stock market, you get it. That’s a huge plus. a greater advantage if your partner is a manic-depressive who drinks heavily. The crazier he is, the more money you will make. (Buffett was referring to his mentor Benjamin Graham’s allegory of Mr. Market, a character offering d buy or sell to investors at a different price every day.) (1997)

7. “We consider volatility as a measure of risk crazy.” (Buffett said short-term price movements are meaningless and pose no threat to a long-term investor, whereas active trading, paying excessive fees, and borrowing money are real means of harming future returns). (2001)

8. “The risk of an investment is not measured by beta (a Wall Street term encompassing volatility and often used to measure risk) but rather by the probability that this investment will cause its owner a loss of power purchase during its intended holding period. Assets may fluctuate widely in price and not be risky as long as they are reasonably certain to provide increased purchasing power during their holding period.” (2011 )

Read more: Warren Buffett faces the dual challenge of inflation and rising interest rates this year. Veteran investor Tom Russo shares 8 reasons why he expects the billionaire to triumph.

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.

Good investment!

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.)

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Jan 19 (Reuters) – Morgan Stanley (MS.N) reported fourth-quarter profit that beat market expectations, outpacing rivals as its focus on advising high-net-worth clients paid off, pushing its shares higher up 3.7% on Wednesday.

The Wall Street investment bank also benefited from a boom in global transactions and spending restraint at a time when its peers had been hampered by rising wages and technology costs.

Full-year earnings and revenue were a record for the bank, which advised on some of the world’s biggest mergers during the year. Net income jumped 37% to $15 billion and revenue jumped 23% to nearly $60 billion.

The bank also raised its long-term target for return on tangible equity (ROTCE), a key metric that measures how well a bank uses shareholders’ money to generate profits. He is aiming for a ROTCE of at least 20%, up from 17% previously.

“We are increasing our ROTCE target to reflect the earnings power we see in our business model,” Chief Executive James Gorman told analysts on a conference call.

Since taking office a decade ago, the 63-year-old CEO has transformed Morgan Stanley from a Wall Street firm heavily weighted in losing business activities into a more balanced bank. He was the driving force behind Morgan Stanley’s decision to acquire Smith Barney and made wealth management a cornerstone of its revenue stabilization plan.

The 2020 acquisitions of E*Trade and Eaton Vance for a combined $20 billion doubled that strategy, differentiating Morgan Stanley’s focus from its peers.

The bank’s wealth management unit reported a 10% increase in revenue to $6.25 billion, generating record annual profit.

In the quarter ended Dec. 31, earnings were $3.59 billion, or $2.01 per share, and beat market expectations of $1.93 per share.

Shares of Morgan Stanley rose 2.5% in morning trading.

Its results capped a mixed earnings season for the country’s biggest banks which benefited from the wave of mergers and acquisitions but were held back by weak trade and rising spending, which inflated as they were spending heavily to retain key personnel in a race for talent.

Morgan Stanley’s traditional rival Goldman Sachs (GS.N) on Tuesday reported fourth-quarter earnings that beat expectations, sending its shares down as much as 8%. JPMorgan (JPM.N) beat earnings expectations last Friday but saw its shares fall 6% due to spending concerns. Read more

Unlike some competitors, Morgan Stanley has benefited from integrating technology through its acquisitions rather than having to build it from scratch, Gorman told analysts.

It has also tied pay to performance in its wealth management and investment banking divisions, Gorman said.

Compensation expense remained roughly flat in the quarter compared to a year ago.

HEALTHY CHANNELING

Morgan Stanley’s investment bank turned in a strong performance and chief financial officer Sharon Yeshaya said its pipeline remains “healthy” through 2022.

“CEO confidence remains elevated and markets remain open and constructive,” she told analysts.

In 2021, Wall Street’s investment banking giants enjoyed a global deal boom. Read more

Morgan Stanley advised 420 deals last year and was ranked third in global investment banking rankings, after bigger rivals Goldman Sachs (GS.N) and JPMorgan Chase (JPM.N), according to data from Dealogic.

Overall revenue from Institutional Securities, which houses Morgan Stanley’s investment banking and trading units, fell slightly to $6.7 billion, largely due to weak trading.

Trading revenues fell 26%. Equity trading revenue rose 13%, but the gains were wiped out by a 31% drop in fixed income trading revenue to $1.23 billion.

Overall revenue reached $14.5 billion from $13.6 billion a year ago.

Reporting by Sohini Podder and Manya Saini in Bengaluru and Matt Scuffham in New York; additional reporting by Mehnaz Yasmin; Written by Anirban Sen and Matt Scuffham; Editing by Arun Koyyur and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.