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A Market Correction is an Opportunity for the Patient, Long-Term Investor

“A market downturn doesn’t bother us. For us and our long-term investors, it is an opportunity to increase our ownership of great companies with great management at good prices. Only for short-term investors and market timers is a correction not an opportunity.” — Warren Buffett

The chart below illustrates how four different investor reactions to a market correction can impact returns. Four hypothetical investors each invested $10,000 in the market from January 1, 1972, to December 31, 2013, but all four investors acted differently during the 1973 to 1974 bear market.

The Nervous Investor sold out and went to cash. The Market Timer sold out but moved back into stocks on January 1, 1983, at the beginning of a historic bull market. The Buy and Hold Investor held steady throughout the period. And lastly, the Opportunistic Investor realized that the bear market had created opportunities and contributed an additional $10,000 to his original investment on January 1, 1975.

Source:  Timeless Wisdom for Creating Long-Term Wealth.

One thought on “A Market Correction is an Opportunity for the Patient, Long-Term Investor

  1. I know this is old news by now but I have not been abel to ignore the graph. It seems to imply that the ‘opportunistic investor’ got more than double the return of the ‘buy and hold investor’. In reality the first one invested twice the amount of money than the latter investor. The text below point to this correctly for most of the readers will look at the graph and get the idea that they get is that ‘buy and hold’ is a far inferior way to invest than the what it really is.

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