“Success comes down to rare moments of opportunity. Be open, alert, and ready to seize them. Gather the right people and resources; then commit. If you’re not prepared to apply that kind of effort, either the opportunity isn’t as compelling as you think or you are not the right person to pursue it.” Stephen Schwarzman, Chairman and CEO, Blackstone
In life, you will inevitably encounter many problems, challenges and hardships. Many of these troubles are the consequences of your actions and behaviors. While other problems and hardships are outside of your control and purview. Yet, in every challenge, there is inevitably opportunity.
During the 2008 global economic crisis and subsequent Great Recession, Warren Buffett maintained his faith in the U.S. economy. In an October 2008 “Buy America, I Am”, NYT opinion article, Buffett explained that the global economic turmoil was not a signal of doom and gloom, but rather a prime investing opportunity. And walking the talk, Buffett made a big bet on Goldman Sachs.
Like other financial institutions, Goldman was on the verge of collapse as Buffett stepped in and stabilized the situation. Thanks to Buffett funneling $5 billion into Goldman Sachs in the midst of the economic crisis and federal government intervention, Goldman was able to survive and recover.
“Successful investing relies heavily on buying socks that have good prospects, but for which investors currently have low expectations.” James O’Shaughnessy
Buying Quality
The key to successful investing for many Warren Buffett stocks comes down to quality. Buffett only focuses on those firms with low debt, strong cash flows, rising sales, and top-notch management teams. This allows them to perform well even during market crashes and recessions. His strategy is based on long-term investing, choosing stocks that deliver steadily rising revenues/profits, holding them for decades, and collecting a stream of dividends.
The Laws of Wealth Rule #3 – Trouble Is Opportunity.
“The market feels most scary when it is actually most safe… Corrections and bear markets are a common part of any investment lifetime, they represent long-term buying opportunity and a systematic process is required to take advantage of them.” The author quotes Ben Carlson: “Markets don’t usually perform the best when they go from good to great. They actually show the best performance when things go from terrible to not-quite-so-terrible as before.”
“The fact that we’re risk averse and loss averse from an evolutionary perspective, from a psychological perspective has done the human race a great deal of good and has kept us around, but if you apply that same risk aversion and loss aversion to financial markets at a time when we’re living longer and longer, and inflation is what it is, we’re not able to compound our wealth at a sufficient enough clip to have the kind of retirement that we’ve dreamed of. ” Daniel Crosby
Risk is the likelihood that you will not achieve your long term financial goals and be able to live the lifestyle you desire.
Successful investing over the long term cannot be predicated on hope and luck. It must be grounded in a discipline approach that is applied in good times and especially in bad and is never abandoned just because what is popular in the moment may not conform to longer-term best practices.
So, in the words of former White House Chief of Staff Rahm Emanuel at a 2008 Wall Street Journal Forum, “You never want a serious crisis to go to waste.”
References:
- https://thekeypoint.org/2017/05/21/the-laws-of-wealth/
- https://www.picpa.org/articles/cpa-conversations/cpa-conversations/2019/01/10/exploring-the-laws-of-wealth-with-author-daniel-crosby
- https://www.cnbc.com/id/40276100
- https://investorplace.com/2020/10/5-great-warren-buffett-stocks-to-hold-through-the-next-recession