I don't worry about the down side because I never put myself in the position where I have to sell during market crash... when that time comes I buy more of the same for less
one of the reason I stay debt free ... I can open my wallet when other people contract..A Warren Specialty I like to emulate
and there lies what I see differently from other people ...you are too focus on the market movement where as you should be focus on the business.
the keys is to have a decent understand of the business so that things like that should not scare you but present you with an opportunity to buy very good business at price you unlikely to get again for a long time.
this is the best quote from Benjamin Graham (most considered him to be the fore father of value investing and Warren Buffett great teacher)
'In the short run, the market is a voting machine but in the long run, it is a weighing machine.'
what he is saying is in the short term price will be determined by people moods, emotion, greed and fear but in the long run it reflect the business fundamental, as in if the business keep throw out earning and dividend and increase them in most case, the price of your stock WILL goes up as sure as the sun will rise the next day....
at the end of the day after all the greed and fear, noises, headlines cash flow matters...business that throw out lot of free cash flow and paid dividend they will deliver you substantial gain down the track.
so ONLY buy and hold strong fundamental business and ignore the rest (the hype, the boom, the new fashion etc...)
and read chapter 8 and chapter 20 from the Intelligent Investor by Ben Graham ... that is all you need from that book ...2 most valuable chapters...where he coverers the Margin of Safety and Mr Market Concept ..
not just read it but truly understand it and apply it to your stock buying decision.
what are some of the good business you may ask and in my opinion and I been monitoring successful investors portfolio and I discovered a simple secret ...they all buy a certain type of stocks ... FMCG stocks... it stands for Fast Moving Consumer Goods
as it goods or service people use every day in and out, rain, hail or shine and it require little capital to run and expand... not food producers ...they are bad business but
Woolies, Wesfarmers, KFC, Mcdonalds, Flight Centre, Coke, Veda, Dominos, Retail food Group, Navitas, Financial companies like banks and more ... these business require little money to run and expand and the result lot of free cash flow and the result lot of happy shareholders because the business keep throw them back all these free cash flow via dividend and the more earning and dividend you rack up the market will re-price you accordingly
no mining, no airlines, no car manufacturer etc...
take you a while to sink in what are all the good business... I can identify them
as soon as I read their business model or prospectus.....I dont understand the model or the business I don't invest in them, I don't care who invest in them even Warren Buffett...
Then it come down to how much I want to pay if its cheaper than I think it worth I load it up ...I don't care if the market crash tomorrow or the next year because I know the weighting machine is on my side.
with this principles you tend to make more in a crash as you snapped up all the good bargains and sell back
to other people in happier time and the cycle repeats itself every so often.
here is an exercise plot say nvt.ax or dmp.ax on finance.google.com click on 10 years charts and see anything happen to them during, before and after GFC
Weighting machine at work, have a dozen or two of these business What Crash? GFC isn't in its dictionaries
notes that banks do have cycles but generally very good business ...you just need to be comfortable to hold for long term or exit for profit at some point... banks I tend to make money and go and buy back later...
