In my opinion, the worst thing investors can do is sell during a panic. Since 2001 the S&P 500 has increased by ~7.5% per year, yet the average investor has received a return of only 2.9% per annum. Why? Because people buy and sell stocks based on emotional reasons and not fundamental ones, buying in when the outlook is rosy (and valuations are highest) and selling out when times are tough (and valuations are lowest).
I have no idea how much longer this relentless selling will continue, but I do believe there are a whole host of high quality businesses that are positioned to do well over the medium to long term that are selling at significant discounts to what they are truly worth. The near term will likely be bumpy, but I’m optimistic about the future. In fact, now is when investors should be thinking about increasing their equity exposure: historically, the best time to invest is when you feel the worst. Even highly experienced and successful investors find taking this plunge difficult, particularly when prices keep falling, but buying great businesses at marked-down prices and holding them for the long-term is historically how the best returns are made.
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