The recent sell-off due to interest rate hikes and high inflation in global markets has alarmed investors.
The US Federal Reserve plans to withdraw support for the US economy since the start of the pandemic in March 2022.
Omicron has affected industries around the world.
Tensions over Russia’s threat to invade Ukraine — and the likelihood that the US will retaliate with sanctions — is another threat to the market.
Unsurprisingly, investors are concerned about geopolitical tensions, rising crude oil prices, supply chain restrictions, inflation and the never-ending pandemic. They keep thinking about where the market is going.
In times like these, it’s important to listen to what reputable market gurus have to say.
Below are some quotes from legendary global gurus about current market trends and what to expect.
1. Ray Dalio
“Trying to time the market is a fool’s errand.”
Bridgewater Associates chairman Ray Dalio said in an interview last month that most people are simply not well equipped to predict which stocks will rise and which will fall and then invest accordingly.
Ray Dalio has a very simple analogy to explain the whole concept.
According to the billionaire investor, it might be better to try to beat Usain Bolt in a footrace or Michael Phelps in the pool than trying to time the stock market, because that’s harder than competing in the Olympics.
Individual investors often fall into the same pitfalls over and over again.
It’s easy to listen to those who say you should buy and hold for the long haul when you’re in a bull market, which we’ve been seeing for a long time now.
In reality, when the market starts to fluctuate, volatility rises. People are starting to flip. Holding on to your weapons becomes much more difficult.
From the very beginning, investors should stick to their investment strategy when the market becomes volatile.
There are plenty of studies on how you would have fared badly if you missed the stock market’s 15 or 20 best days. You may have remained invested for 10 to 15 years for each of the remaining days. But if you missed the best 15-20 days, your returns would have looked terrible.
That’s why Ray Dalio advises you not to time the markets.
Ray Dalio is the founder of the world’s largest hedge fund company, Bridgewater Associates, which manages $154 billion.
According to Forbes, Dalio has an estimated net worth of $20 billion as of January 2022, placing him 88th on their billionaires list and 36th on the Forbes 400 list.
2. Howard Marks
“Reducing market exposure through ill-considered selling—and thus not fully participating in the markets’ long-term positive trend—is a deadly sin in investing.”
This is what Howard Marks wrote in his latest memo to the clients of his investment company Oaktree Capital Management, entitled ‘Selling Out’.
In the memo, Marks asks a very important question: Why sell something that you think has a positive long-term future, in preparation for a dip that you expect to be temporary?
Just because things are tough right now doesn’t mean you should liquidate your property.
Marks believes that you shouldn’t sell something just because it has gone up. He says investors tend to make gains on stocks that have risen because they like to see a fictitious gain turned into a real one.
However, this is a mistake as the investor will put both principal and profit back to work and end up taking the same risk.
Therefore, selling just because something has gone up is not the right way to go about it.
What about selling a stock after it has fallen a lot?
Again, selling for this reason is not a good idea. If you’re selling out of panic, you’re giving the buyer the opportunity to buy into what could potentially be an undervalued asset.
Therefore, the buyer outperforms your costs and you end up with poor returns in the long run. Therefore, selling just because something is down 40%-50% from its high is not the right choice.
He further adds, ‘Selling things that have fallen for no reason, turning negative fluctuations into permanent losses and missing out on the miracle of long-lasting composition’
When investors discover an investment that can grow over time, one of the hardest things to achieve is to be patient and hold the position as long as it is reasonable based on the expected return and risk.
The current musings are highly relevant given the economic uncertainty as the world struggles to shake off the worst effects of the Covid epidemic as it finds itself in an inflationary environment.
Here’s one of the key lines from his memo:
In other words, the decision to shorten or sell positions entirely comes down to judgment… just like anything else that matters in investing.
Howard Marks is a famous writer and American investor. He is the co-founder and co-chair of Oaktree Capital Management, the largest investor in distressed securities worldwide.
Howard Marks’ net worth as of February 2, 2022 is approximately $2.2 billion.
3. Jeremy Grantham
The current stock sell-off is eerily similar to the crash that triggered the Great Depression.
Veteran investor Jeremy Grantham believes the current stock sell-off is “uncanny” familiar with the Wall Street crash of 1929 that sparked the Great Depression.
The Great Depression was a severe global economic depression that occurred mainly in the 1930s, starting in the United States.
The event wreaked havoc on Wall Street and wiped out millions of investors. In the following years, consumer spending and investment declined, causing a sharp decline in industrial production and employment.
Grantham is rather bearish and believes that an American ‘super bubble’ is about to implode.
According to Grantham, the sharp decline in some of the stock market’s “flaky” areas has followed the pattern of previous eruptions, including the dotcom bubble in 2000.
In addition, the recent global spike in stock prices has sparked debate over a possible stock market bubble.
Jeremy Grantham is a British investor and co-founder and chief investment strategist of Grantham, Mayo, & Van Otterloo (GMO), a Boston-based wealth management firm.
Legendary investor is known for his pessimism about the stock market in general. He has made some notable statements in the past, such as the Japanese real estate and stock bubble and the rise and fall of the dotcom in the 1990s.
4. Jeffrey Gundalach
The stock market, and risky assets in general, has been supported by the Fed’s balance sheet expansion for more than a decade. Now that we are gradually phasing out and eventually raising interest rates, it will be more difficult for the markets.’
Jeffrey Gundlach sees “rough waters” ahead for financial markets as the Federal Reserve stands ready to accelerate the end of QE and continue rate hikes.
According to Jeffrey, the bull run in markets and other riskier assets over the past decade has been supported by the Fed’s balance sheet expansion.
To achieve its goals, the Fed uses a variety of programs and initiatives, most of which result in a change in the composition of the Fed’s balance sheet.
The Fed can change the amount and size of assets and liabilities on its balance sheet, increasing or decreasing the money supply in the economy.
However, Gundlach believes the Fed’s decision to raise interest rates in March 2022 will hurt market sentiment.
The rate hikes are essentially a step towards normalization.
To cope with the turbulent financial markets and raging inflation, the Federal Reserve could raise interest rates 3-4 times in 2022.
Jeffrey Gundlach is an American investor and businessman. He is the co-founder of DoubleLine Capital investment fund, which manages more than $140 billion in assets.
As of February 2, 2022, Gundlach’s net worth is $2.2 billion.
5. Seth Klarman
In a market downturn, momentum investors can’t find momentum, growth investors worry about a slowdown and technical analysts don’t like their charts. But the discipline of value investing tells you exactly what to do’.
Renowned investor Seth Klarman beautifully explains the situation that unfolds during the stock market collapse.
Klaram firmly believes that whatever strategies an investor chooses during a market sell-off will generally yield no returns except for one value investment.
Value investing requires a lot of hard work, unusually strict discipline and a long-term investment horizon, according to Seth Klaram.
While momentum investors take a short-term approach. Despite high positive average returns across a wide range of asset classes, momentum strategies can suffer from unexpected and prolonged series of negative returns.
Currently, value investors are gaining prominence on Wall Street as growth stocks face continued volatility due to rising inflation and tighter monetary policy.
Seth Klarman is an American billionaire investor, hedge fund manager and author. He also runs the Boston-based company Baupost. With $30 billion under management, Baupost is one of the largest hedge funds.
Klarman is an expert in value investing. Interesting fact is that his book “Margin of Safety,” a cult classic among investors, sells for a whopping $2,500 on Amazon.
It comes down to
When markets are volatile, most people have no idea where to start when it comes to investing.
Fortunately, we can learn and gain knowledge from these great investors. The investors mentioned above have nearly two decades of experience in their respective fields.
If you are nervous or afraid to invest in stock markets because of the recent correction, look to these quotes for reassurance and all will be well in the long run.
As an investor, you should try to live your life according to these philosophies to get better returns.
To be a successful investor like them, one has to put in the time, learn about companies, review financial statements, study investment strategies and identify reliable sources.
Have fun investing!
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
(This article is from Equitymaster.com)
(This story was not edited by DailyExpertNews staff and was generated automatically from a syndicated feed.)