How to deal with a big drop? Patience to wait for good cards

Combined from TianTian Fund.

What kind of mentality should be maintained under a big drop? Seven masters provide coping strategies and valuable advice when facing a major fixed-income market decline, hoping to inspire investors.

Warren Buffett: Stock prices will eventually reflect intrinsic value

"Stock God" Warren Buffett's 99% of wealth comes from the value of the shares of Berkshire Hathaway, a listed company he controls. Therefore, once there is a general stock market crash, Buffett's Berkshire Hathaway shares are also likely to be affected. So, how did Buffett react during the 1987 U.S. stock market crash?

According to foreign media reports, during the crash, Buffett may have been the only person in the U.S. who was not constantly watching the collapsing stock market. There were no computers or stock market terminals in Buffett's office, and he didn't pay attention to stock market quotes at all. For a whole day, he stayed quietly in his office, making phone calls, reading newspapers, and reviewing annual reports of listed companies. After two days, a reporter asked Buffett: What does this stock market crash mean? Buffett's answer was simple: It may mean that the stock market has risen too high in the past.

Buffett did not panic to inquire about news or panic to sell stocks. Faced with a big drop, a significant decrease in his wealth, and a sharp decline in the heavy-weight stocks he held, he remained very calm. The reason is simple: he firmly believes that the listed companies he holds have long-term sustainable competitive advantages, good growth prospects, and high investment value. He believes that stock market crashes, like natural disasters, are temporary and will eventually pass, returning to normal, and the stock prices of the companies he holds will eventually reflect their intrinsic value.

Peter Lynch: A big drop is a great opportunity to make big money

During the 1987 U.S. stock market crash, many people went from millionaires to poverty, experienced mental breakdowns, and even committed suicide. At that time, the superstar of the U.S. securities industry, Peter Lynch, who managed over $10 billion in the Magellan Fund, saw the fund's net asset value drop by 18% in a single day, resulting in a loss of up to $2 billion. Like all open-end fund managers, Lynch had only one choice: to sell stocks. To cope with the unusually large redemptions, Lynch had to sell all the stocks.

Over a year later, Peter Lynch still felt scared when he recalled, "At that moment, I really couldn't be sure whether it was the end of the world, or we were about to fall into a severe economic depression, or if things weren't that bad yet, and it was just Wall Street about to collapse?"

Afterwards, Peter Lynch continued to experience many stock market crashes but still achieved very successful performance. He proposed three suggestions:

First, do not panic and sell stocks at low prices. If you despair and sell stocks at a low price during a stock market crash, your selling price will often be very low. The market conditions in October 1987 were terrifying, but there was no need to sell stocks on that day or the next. The market began to steadily rise in November of that year. By June 1988, the market had rebounded by over 400 points, an increase of more than 23%.

Second, have the courage to hold onto stocks of good companies.

Third, dare to buy stocks of good companies at low prices. A big drop is the best opportunity to make big money: huge wealth is often earned in such stock market crashes Soros: Never Bet the Farm

George Soros, the founder of Quantum Fund, said that the instinct to survive is innate, and the ability to survive is a skill. "In my life, there is nothing more terrifying than death. As long as you don't die, there is a solution." During the stock market crash in 1987, Soros' Quantum Fund lost $650 million to $800 million, with a decline even exceeding the overall market. Instead of waiting idly, he cut his losses, sold off all investment portfolios at a low price, and then used the remaining funds plus financing to establish a position in US dollars. By the end of the year, Quantum Fund's growth rate returned to 14%, completing a major turnaround.

Soros said, "Mistakes are not shameful, what is shameful is when mistakes are obvious and not corrected. Taking risks is understandable, but remember never to bet the farm."

Philip Fisher: Don't Rush to Buy Unfamiliar Stocks

Choosing the right investment timing is very difficult. When investors are uncertain about timing, they hedge. Roughly estimated, 65% to 68% of American investment guru Philip Fisher's funds are invested in the 4 stocks he truly values, with the remaining 20% to 25% in cash or cash equivalents, and the rest in promising 5 stocks. Fisher spends a lot of time researching and is not in a hurry to buy. "In a continuously declining market environment, do not rush to buy unfamiliar stocks."

Jesse Livermore: Floating Losses Indicate Mistakes

Legendary figure in American stock history, Jesse Livermore, once pointed out that when investors incur floating losses after buying or selling, it indicates that they are making mistakes. In general, if the floating losses do not improve within three days, sell immediately. Never average down losses, always remember this principle. Once the price enters a clear trend, it will automatically move along a specific path that runs through the entire trend. When you see a danger signal, do not argue with it, avoid it! After a few days, if everything still looks good, then come back. This way, you will save a lot of trouble and money.

Jim Rogers: Buy Value, Sell Madness

Wall Street investment guru Jim Rogers once pointed out that one should patiently wait for the right opportunity, make money, take profits, and then wait for the next opportunity. Only by doing so can one outperform others. Market trends often show long periods of stagnation. To avoid getting trapped in a stagnant market, investors should wait for catalytic factors that can change the market trend. Buy value, sell madness.

Jeremy Grantham: Investors Should Patiently Wait for Good Hands

Global top investment strategist Jeremy Grantham advises:

First, believe in history.

History will repeat itself, and forgetting this will put you in a dangerous position. All bubbles will burst, and all investment madness will dissipate. The task for investors is to survive in market fluctuations.

Second, do not be a borrower or a lender.

If investors borrow to invest, it will disrupt their investment ability. Portfolios without leverage will not face margin calls, while leveraged investments will face this risk. Leverage will damage investors' patience. Although it may temporarily increase investors' returns, it will eventually destroy them suddenly Third, do not put all your assets in one basket.

Allocate investments across several different areas, and as many as possible, to increase the resilience of the investment portfolio and enhance the ability to withstand shocks. Obviously, when there are numerous investment targets that are different from each other, investors are more likely to survive critical periods of decline in their main assets.

Fourth, have patience and focus on the long term.

Investors need to patiently wait for good opportunities. If the waiting time is long enough, market prices may become very cheap, which is the safety margin for investors.

Fifth, stay away from the crowd and focus only on value.

The best way to resist the crowd's excitement is to focus on the intrinsic value of individual stocks calculated by oneself, or find a reliable source of value measurement (regularly check their calculations). Then, worship these values like heroes and try to ignore everything else. Remember, the great opportunities that can help investors avoid pain and make money are very clear from a numerical perspective: compared to the long-term average P/E ratio of the U.S. stock market at 15 times, the P/E ratio was 21 times at the market peak in 1929, and 35 times at the peak of the 2000 Internet bubble for the S&P 500! In contrast, at the stock market low point in 1982, the P/E ratio was 8 times. It's not complicated.

Sixth, be true to yourself.

As individual investors, it is essential to understand one's strengths and weaknesses. If one can patiently wait and ignore the temptations of the crowd, they are likely to succeed. Investors must accurately know their threshold of patience. If investors cannot resist temptations, they will never manage their money well