About the Market
Yes, but for those who understand how human nature operates in the market, volatility is welcome and the stock market is not as risky as it looks to others. The risk in volatility is that a sharp price decline may stimulate panicky selling due to fear of loss. However, a true long-term investor scarcely ever is forced to sell. He or she can afford, emotionally and financially, to wait to sell at an opportune time. Stock market volatility creates opportunities for the informed, unemotional investor to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. Why should one practice value investing instead of growth investing? Value investing has historically outperformed growth investing. This seeming anomaly is due to 1) the fact that value investing incorporates a margin of safety to minimize risk; and 2) growth investing, with its pie-in-the-sky goals, often leads to large losses. The comparison between value investing and growth investing is often likened to the race between the tortoise and the hare; in the end, it’s the slow, methodical approach that wins the race. What is your opinion on the current level of the stock market? While we usually have personal opinions on the current valuation of the stock market at large, we feel that they are irrelevant, as we focus on the valuation of individual companies. What could happen to my account at CVM in the event of a stock market crash? In the recent past, stock market participants experienced two periods of severe declines in stock prices.
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