Stock market wisdom for difficult times

Crash worries at the market? Investors can orient themselves on these pearls of wisdom that never get old.

Many global uncertainties are weighing on the markets, and some experts are worried about an imminent global crash. But investors should not be driven by fears and should keep these old pearls of wisdom in mind instead. 

“Be greedy when others are fearful. Be fearful when others are greedy.”

With his experience and knowledge, even a crash should not upset you: Stock exchange guru Warren Buffett. His well-known statement “Be greedy when others are fearful. Be fearful when others are greedy” sums up his attitude. If the stock markets are going down, this is the opportunity to get in cheaply. Because there are certain fluctuations in the markets and even if it goes downhill at times, who knows, soon the world may look quite different again, and investors can sell their bargains more expensive again.

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Long-term strategy

A lot can be philosophized about Buffett’s statement “Today someone is sitting in the shade because someone else planted a tree a long time ago”. One possible interpretation is that as an investor, you can take a high return from an equity investment with you if you invest for the long term. The money you invest in a company, in other words the seed, slowly grows into a tree, and if you have the patience, you can reap the rewards later.

André Kostolany, one of the biggest stock exchange gurus in Germany and an old-school speculator, also proposed a similar motto. “Buy shares, take sleeping pills,” is probably one of Kostolany’s best-known stock market pearls of wisdom. The old stock market master, who died in 1999, wanted to say that patience pays off on the stock market in the long term.

There are also many Forex or CFD traders that believe that a long-term strategy outperforms any other trading strategy. The markets often move in waves, so it is not surprising that investors with a long breath are often those that succeed in the end. However, it is also true that a long breath often also demands to have “deep pockets”… 

“Don’t try to catch a falling knife.”

Warren Buffett sees a buying opportunity in a downturn, but investors should be careful not to catch a “falling knife”, as the stock market saying goes. This statement is intended to warn against buying a sharply falling stock because in the worst case it could fall even further and there are always reasons for such a crash. Investors should, therefore, better wait for a bottom to form first. Technical analysis and charting techniques can help to identify these bottoms as well as trends and moving averages, as examples.  

Investing in stable companies

Anyone who invests in companies whose prospects are convincing should not sell these shares immediately because of a price setback. An important, large company that has potential will also recover from a setback and return to profitability. This means, once again, that traders and investors should not act to emotionally and hasty but instead stay calm and hold at least a portion of the investment for a longer-term. 

Cash is King

Another stock market saying is that if you sell your shares on time and have sufficient cash at your disposal, you can observe a stock market crash in a relaxed manner and then buy-back-in at a favourable price.

In any case, investors should act rationally even in times of crisis and not be driven by fears and worries. 

André Kostolany put it similarly: “On the stock market, two times two are never four, but five minus one.” You only have to have the nerves to endure the minus 1, the stock market guru already taught at his time. This stock market wisdom warns investors that stock exchanges never rise linearly, but that there are also price declines. However, investors should not be driven crazy by short-term downward swings.

“Anyone can speculate. To do it at the right time – this is the art.”

 This is yet another popular saying from Kostolany. Timing is everything; The stock exchange guru said when it comes to speculative financial investments. 

“The whole stock market depends only on whether there are more stocks than idiots – or vice versa.” 

The stock market sometimes blooms strangely and tends to exaggerate from time to time. If a herd of investors stubbornly runs in one direction, this can drive the price of a share to absurd heights.

 “On a gold rush, don’t invest in the diggers. Invest in shovels.” 

This is yet another of Kostolany’s stock market wisdom, which is likely to hold even today. One example is the Internet boom. A search engine is needed to find content on the Internet at all – Google’s business model was born.