I was watching Bloomberg TV today and the market was plunging. You could tell that the hosts were getting nervous about the market's situation with tariffs, slowing earnings and all the theatrics going on in Washington.
The host was interviewing this guy who was probably 68 or older. She was questioning him about the market. She was a little frazzled and kept pushing the negative aspects of the current environment, but the interviewee was calm as a cucumber. It was as if she was trying to spread the infection of fear and the DOW was only down 400 points.. What happens when the market drops by a real large percentage in one day, like 1987? OMG!
The older guy talked about tariffs as a temporary thing and the opportunities this environment has created to pick up bargains. His point was that the tariffs would eventually pass in due time. The opportunity to pick up companies at favorable prices was a growing. He advocated picking up strong, well-capitalized, favorably priced companies with a history of earnings and dividends. He stuck to his guns while she continued to interview him as if she was looking for him to buy into the "fear of the market".
This conversation made an impression on me. Here was this young lady buying into the herd effect of fear while this older seasoned gentleman was just shrugging it off as an opportunity. He had brought up some great points which I believe are worth repeating.
- The tariff thing is a real problem, but it will not be around forever. Have a long term perspective. Just to clarify, this means years - not hours, days, weeks or months.
- Get rid of the more speculative companies in your portfolio. Those companies will take a harder hit in a down market.
- Buy well-capitalized companies that have an established record of earnings and dividends that are favorably priced. Stay away from overly leveraged companies. Over the long-term, studies have shown that dividends and the reinvestment of dividends are the greater part of returns.
- Above all, stay cool. That will pay dividends!
It is time to forget the "get rich quick" mentality of the last several years and dig in for the long term. Controlling fear and restraining greed are coming back in style.
