How to Weather Mr. Market’s Moods

By now, you probably have created a portfolio of carefully picked stocks. Each has a wide Margin Of Safety (MOS). We did talk about how to achieve that in a previous post. Simply put: Never pay the price tag. Not only that; but go to the extent of paying 50 cents for each dollar. You may wonder: But how? If I found a beautiful business, and fell in love with it, how could I wait till its price fell to those levels?

The answer is the following: Since Mr. Market is moody, its movements are not always logical. Often times it does punish a good, or even a great, business, and yank its share price way down. If you did your homework of investigating good businesses and placing them on your radar screen, you would capture that opportunity and buy as many shares as you could. This also requires having cash put aside for such instances.

So back to the title of this post, in order to withstand price fluctuations, especially in times of uncertainty, or even recessions, you need a portfolio that has been built based on the principles we’ve been talking about; that’s number one. Number two, you need the emotional stamina to stay put! Yes, do nothing till the storm passes. In the middle of the hurricane, you can remain stable, because you know your businesses are good, and you know you had bought them at attractive prices, so they will bounce back for sure.

Any action you take, you will most probably regret later when the sun rises the next morning! Sometimes inaction is the best of actions. It’s helpful here to have a longer view of your investment, part of your investment strategy (which I will talk about in a future post) is to decide a time span of your portfolio. This could be three, five, or even 10 years. Having that in mind, helps you ignore monthly fluctuations and weather the storm!

Till the next post, happy investing 🙂

The Wealth Maker