Saturday, 18 April 2015

Being fearfully greedy: Why I buy in bear markets

To conclude, because we don’t know what will happen to prices in the short-term, we can only buy with a long-term goal in mind and hope we’re not hit by some true wealth destroying phenomena like nuclear war or a return to communism.

Greed and fear

Say you’re a young-ish investor like me, with 30 years of earnings ahead, yet already holding a reasonable portfolio.
If you’re fearfully greedy, then when markets are rising – as they did since 2003 – you’re glad your money was invested instead of spent on holidays and TVs.
That’s greed taken care of. (Greed is the easy bit!)
However, you should also be fearful of sudden reversals that rob you as quick as a pickpocket.
In the stock market, money disappears like in Tommy Cooper‘s magic tricks: “Just like that!”
Of course nobody is complacent when markets are consistently falling. Instead, the fear often gets overdone.
Yet if you’re young and well-positioned, you should be glad you’ve got the chance to buy the same shares you were buying last month for 10%, 20%, or even 50% less than before.
You’ll be scared, too. Your new ‘bargain’ shares could halve again in a truly vicious bear market.
The greedy bit is thinking about your future long-term gains. The fearful bit is not over-doing it in the short-term.

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