Just as bear markets create opportunities for us to buy at unrealistically low prices, bull markets frequently provide us opportunities to sell fully valued stocks—in order to redeploy our clients’ assets into more attractive investments. Thus, we view market fluctuations, including sharp fluctuations, as good. Indeed, if the equity marketplace had provided a constant rate of return from the inception of our track record to the present, I’m convinced that our long-term investment performance would have been less than what we actually achieved. That’s because market volatility works to the advantage of patient investors who have done their homework and are prepared to buy bargain priced stocks during the marketplace’s periodic ‘sales’ and to sell richly priced investments when they are swept up in more enthusiastic periods. (That’s easy to say, of course, but not so easy to do.)
Nov 2003