Expert Advice From The Best
Turn to the best in times of toughness
This installment of The Matt Allen Letter is free for everyone. If you would like to read about stock analysis, stock market analysis, and much more. You can subscribe here.
One of the hardest parts about sending out a newsletter multiple times a week is coming up with topics on top of the research that goes into the topics. I had a fun-informative newsletter planned out for today, but I decided to postpone it to next week.
The reason is that the markets and economy are facing so much negativity. You have seen it when you are shopping, you have seen it in your 401K, you have seen it at the gas pump, and you have seen it in your individual investment accounts.
The S&P 500 is down 21.6% in the first 113 trading days of 2022, the 2nd worst start to a year in history aka since 1932.
In my opinion, one of the best things to do during times of uncertainty is to turn some of the greatest investors of our time.
In this newsletter, I am going to post some of my favorite investment quotes, and what I think about them. Hopefully this will ease some of your anxiety about the state of the economy and markets.
"Decline in stocks is not a surprising event. It recurs. If you live in cold climate, you expect freezing temperatures and when it drops below zero you don't think of this as the next ice age. You know summer will be warm again. Stocks do the same." - Peter Lynch
Stocks have gone up and down since the first stock exchange that was created in 1611. You should expect your stocks to go down just like you expect it to get cold in the winter. However, you should expect stocks to eventually go back up like you expect it to get hot in the summer.
"A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” -Charlie Munger
It does not matter how smart you are. If you cannot handle the market swings in a rational manner, you will never make any money in the stock market.
"I will tell you how to become rich. Close the doors, be fearful when others are greedy. Be greedy when others are fearful.” - Warren Buffett
This is one of my favorite quotes ever. If we know that stocks will go up like we know that it will get hot in the summer, then these down markets provide us with great opportunities.
Whenever people are fearful and don’t want to invest, this is one of the best times to actually invest.
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” -John Bogle
John Bogle was the founder of Vanguard, and he is a brilliant human. John understood that stocks might go down -20% in the short term BUT they have averaged 10% a year since 1957. You just have to stomach the short-term downturns.
“Behind every stock is a company. Find out what it’s doing.” - Peter Lynch
You have to remember that when you invest in a stock, you are investing in an actual business. The stock represents the current price of the business, but it doesn’t represent the true value of the business.
For example, let’s say company x is worth $50 a share, but the stock is priced at $10 a share. You have the chance to make tons of money on this stock.
Never forget that when you buy a stock, you are buying ownership in a business.
“A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” - Warren Buffett
Warren Buffett has always understood that when you invest, you are buying ownership in a company. Warren loves the chance to buy a great company on a discount.
Warren Buffett has a net worth of $104 Billion. If it works for him, I think this strategy can work for us!
“You make most of your money in a bear market, you just don’t realize it at the time.” - Shelby Cullom Davis
Let’s take that example of the company that is worth $50 a share. During a bull market, people will pay $80 for the stock that is actually worth $50.
What happens next? In a bear market, The $80 stock goes down to $10 a share like in the above example.
Wouldn’t it make much more sense to buy that stock at $10 a share and sell it at $50 a share? Instead of buying it at $80 a share and selling it at $50 a share?
“The individual investor should act consistently as an investor and not as a speculator.” -Ben Graham
When you invest, you search for deals like a stock that is on sell for $10 a share.
When you speculate, you buy the stock when it is at $80 a share.
I hope everyone has a great rest of the week!
If you have any questions, feedback, or just wanna say hey, email me at firstname.lastname@example.org