Warren Buffett once said, “Be greedy when others are fearful. Except when earnings are being revised lower, breadth is bad, and you’re in a higher for longer environment.” (I stole this from Ben)
It’s easy to quote Buffett, it’s hard to act like him. And by acting like him, I don’t mean his style of investing, I’m talking about this basic premise that investing should be viewed as a long-term endeavor. And that you should get comfortable being uncomfortable if you want to make money in the stock market.
Right now we’re in a period of moderate discomfort. The S&P 500 is in a 10% correction. This happens once a year on average.
Whether or not the moderate discomfort turns into something more painful remains to be seen. According to Warren Pies, 60% of 10% corrections move on to 15% drawdowns.
Going back to 1950, stocks are at least 10% off their all-time high 36% of the time. And yet, it has gained 25,000% over the same time frame, and that doesn’t include dividends! No pain, no gain.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.
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