“If you can keep your head when all about you are losing theirs ... yours is the Earth and everything that’s in it.” —English writer Rudyard Kipling,
“If—Self-control, patience, discipline—when I was young, my father drummed the lessons of Rudyard Kipling’s famous poem into my head. Today I keep a copy in my wallet—and another on my office wall. Kipling’s ode to stoicism is great life advice—and a blueprint for keeping cool when markets whip up fierce emotions. Stocks’ wild ride since January calls for that cool. Yes, 2022 has tested investors’ resolve thus far, but brighter days lie ahead. Here is more old wisdom to keep you level-headed through this classic correction.
“The four most expensive words in the English language are ‘this time it’s different.’”— Sir John Templeton
Every correction brings first-and-worst tales of unending economic doom—especially when they accompany wars, like the tragedy in Ukraine. But legendary Sir John knew economies are resilient—and coldhearted markets usually move past even the grizzliest stories well before people do.
“The investor’s chief problem—and his worst enemy—is likely to be himself. … How your investments behave is much less important than how you behave.”—Benjamin Graham
The “Father of Securities Analysis” was a behavioral finance expert before the field existed. Heed his warning against emotional decision-making.
“The 13 years I ran Magellan, the market went down nine times 10% or more. I had a perfect record—I went down more than the market, every time … .”—Peter Lynch
Lynch’s Magellan fund averaged returns of nearly 30% annually during his spectacular tenure—and he never tried to sidestep unpredictable, sentiment-driven corrections. Neither should you. Corrections and sentiment-based volatility can’t be timed—only endured.
“Bravery is not the absence of fear. It is overcoming it.” —Mellody Hobson
Successful investors—even this former Starbucks chairwoman turned Ariel Investments’ president—aren’t fearless. But they don’t let fear drive decisions.
“Face up to two unpleasant facts: The future is never clear and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.”—Warren Buffett.
History’s greatest investor knows waiting is costly—market rebounds are usually strongest early on, amid rock-bottom sentiment. Siren songs like, “Wait for the bottom!”—or, “Be sure the rebound is real!”—are misguided. Downturns spur futile quests for certainty, which never comes. Hence, you need to own stocks before uncertainty falls, as I wrote on April 10.
“You don’t make money when you buy stocks. And you don’t make money when you sell stocks. You make money by waiting.” —Mohnish Pabrai
This money manager, author and Buffett disciple knows patience is requisite to earn stocks’ exceptional long-term returns.
“Neither panic nor greed is an investment strategy. … The best foundation to help protect a portfolio against the unpredictable is having—and sticking with—a long-term strategic asset allocation plan."—Liz Ann Sonders
Charles Schwab’s chief investment officer says investors should rarely—if ever—react to short-term market wiggles. As usual, she’s right.
“Fear sells newspapers and keeps people glued to the tube, but fear does not make money in the stock market.”—David Dreman
My former Forbes colleague and master contrarian understood that markets quickly pre-price fears—including many that never come to be. That tees up the positive surprises that turbocharge stocks when few expect it.
“What makes the task of fact finding so difficult is that in the stock market the facts of any situation come to us through a curtain of human emotions.”—Bernard Baruch
Baruch was among the world’s richest and most legendary traders of the late 19th and early 20th centuries, but his words ring as true today. You can’t eliminate your emotions—but self-awareness of them helps you manage their impact on investment decisions.
“Suppose you have years until retirement but because you get jittery when the stock market drops, you sell your stocks or mutual funds. ... When stocks have recovered, you jump back in, but by then you’re ‘buying high.’ That’s like waiting for the sale at a department store to end before buying that jacket you’ve been eyeing.”—Michelle Singletary
Stocks are one of the few things people get more excited to buy when they are pricier. Singletary—a top financial columnist and author—wisely sees downturns as an opportunity for long-term investors.
Finally, more counsel from Kipling: “Force your heart and nerve and sinew to serve your turn long after they are gone, and so hold on when there is nothing in you except the Will which says to them: ‘Hold on!’” Scary downturns usually end when the future looks darkest. Hold on—the rebound’s rewards lie ahead.
