There are certain things in life which are bound to happen sooner or later.
For investors, one certainty is that there are going to be corrections in the stock market.
Sometimes, your position will get crushed by surprise news.
Other times, there will be extended periods during which the stock market goes through a tough stretch.
Boom and Bust
Just consider what we have been through in the last twenty years.
There was the dot.com boom and crash, the housing bubble between 2005 and 2007–and the near- devastation of the entire financial system and deep recession that followed a few years later. Who can forget when a barrel of oil fetched $150 and then plummeted 80% in 2015?
Personally, I cannot count how many times a position of mine has suffered from a poor earnings announcement or negative news.
For example, Reilly Automotive (ORLY) started last week at $218 and closed $172 on July, thanks to poor results and news that Amazon (AMZN) will compete in auto parts.
So, to a certain extent, you get used to the inevitability of volatility and develop methods for handling market adversity.
My prime method for weathering these events is knowing the 50 to 100 or so companies which I think are great businesses and want to own.
When they go on sale, guess what I do? I would buy.
That’s called anticipating the inevitable.
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