Warren Buffett, the Legendary Investor, once said “A downturn is the best opportunity to buy stocks of good companies at reasonable valuations”
Buffett's investment philosophy emphasizes how being patient and steadfast during a slowing economy can aid investors to win in the world of investing.
No matter how stocks move or respond to market pressures, long-term investors need to focus on what the company is doing. Almost every stock reacts to high market volatility which is mostly short-term. Investors must never mix market volatility with business trends. This is because stocks may fluctuate shortly, but they will rise over time if the company's business fundamentals are strong.
2) Look at the business, not the stock.
A stock market downturn is the best time for investors to buy stocks. Warren Buffett once said “A company should always be viewed as a business, not just a stock”. The three most important criteria for a stock purchase decision are:
(i) The company must obtain a good return on the net tangible assets necessary to operate the business. The business's return on capital employed must be greater than 20%.
(ii) The business must be backed by good corporate governance, meaning it must be run by honest and dedicated managers.
(iii) Be mindful when buying a stock. Look at its intrinsic value before buying it.
3) Keep invested.
Always adopt a long-term investment strategy and you'll realize investing in stocks is more rewarding than all other assets, especially bank deposits and long-term bond funds. This is because when you buy stocks, you become the indirect co-owner of the company's profit or loss. Companies with good fundamentals will grow over time. In the long run, when the company is wealthy, your stocks will make you wealthier.