Why Buy Stocks Cheap Like Warren Buffett in this Bear Market?
While you may be worried about what to do with your investments in this recessionary stock market, you have to open your eyes to the opportunities out there.
Courtesy of About.com
Warren
Buffett has noted that this is a time for great opportunities, and
he made a statement to the world about it when he bought $5 billion
worth of Goldman Sachs
(GS) common stock and $3 billion worth of
General Electric
(GE) preferred stock. He also made a $4.7 billion
investment in Constellation Energy Group
(CEG) a few weeks prior to the GE and Goldman deals.
It's no question that this man, along with his Berkshire Hathaway
company, has enviable investing
talent. He has produced a 22% compounded return over the past 40
years! Not even the savviest investors on Wall Street can keep up
with that kind of return.
Stocks on the whole have taken a beating; some deserved it because
they were over-leveraged and run into the ground, but most stocks
that have suffered precipitous losses have been oversold. Investing
in stocks can be very tricky, but if you understand that stocks can
be undervalued because of fear and panic, then you can take
advantage of those prices.
Strong companies that you can see doing well for years to come have
been underpriced in this market; it is your job to find the best
undervalued stocks and let them take you on a profitable ride for
the years to come. One thing stock investors have a hard time doing
is being patient. With value investing in stocks, you have to be
patient because other investors in the stock market may not realize
the real value of a stock until next month, next year, or five
years from now. Do like Buffett does; wait and let it
appreciate.
The Dow Jones Industrial
Average is down over 26% for the past year
(trailing 12 months) and the S&P 500 is down around 29%!
With stocks down this low and this
widely spread. You could actually make big investing gains over the
next several years by simply investing in an index fund or ETF of
the S&P 500 or Dow. Right now you can't go wrong; the market
will get better over time and things will look up again. Why not
get a piece of the market while it's still down?
Stock investing advice is all over the place and when it comes down to
it, you are the one that ultimately has to make the decision. It is
good to get different viewpoints, but make your own strategy. Trade
stocks your own way; that is how you will make money investing in
stocks.
If you are interested in learning more about value investing, I
will be posting about value investing methods soon. Also, stay
tuned for value stock picks. I will find you some great bargains
out there to make you money...
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