My Mum and Dad were from a small town in Northern Ireland. I’m not sure if it was the Irish in him, but my Dad was always quick to recite famous quotes or bits of information he thought was important.
It was greatly appreciated by his kids and one of his favorites was, “the shortest thing people have is their memory.” His other comment was more about where their little town was located and he would muse and say: “sometimes it would take two to three weeks for the news to reach them and he would laugh and say that was okay.”
This past week there has been no shortage of news or headlines coming at us from every direction, second by second, minute by minute keeping everyone informed about the Coronavirus, the US election and of course President Trump. A little different from the old days in Northern Ireland.
With this volume of news, there has been an increase in volatility in equity markets worldwide, which is not surprising. The markets have been surprisingly strong this past decade and people have come to expect an upward market forgetting at times volatility can reappear at any moment.
One of Benjamin Graham’s many quotes was: “In the short run, the market is a voting machine but in the long run, it is a weighing machine”. My interpretation of that quote is that in the short run markets and prices of companies will fluctuate, but in the long run the appropriate price will hold true based on the quality of that company.
It is no different this time. We don’t know the long term effect of the coronavirus or the US election outcome, but in the short term there are going to be disruptions which at times will test our courage and encourage us to think about the future.
What I do know is with our approach of owning great businesses that increase their cash flow, our future retirement income is on sale with market down turns. Will the market go lower? Possibly, but with reinvesting your dividends and saving regularly, you can take advantage of the market movements.
As Warren Buffett says: “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
The best preparation an investor can do is buy a basket of wonderful companies that have a strong economic moat and hold them forever.
That is exactly our approach, so don’t fear the short term market fluctuations. Focus on the long term and invest regularly in your working career.
Happy March
"How will you replace your current income in retirement?"
Jim Seyers