I recently saw an amazing post from Dinesh, one of the members of my Compounding Quality community, about how to handle the current market volatility. It helps show why declining markets create opportunities, explains Pieter Slegers, editor of Compounding Quality.
It has been a boring bull market so far. Finally, things are getting a bit more exciting.
Markets up? Great, enjoy watching your portfolio grow. Markets down? Even better, time to buy high-quality stocks at bargain prices. That’s how the best investors operate. Howard Marks said it before: Train yourself to see both bull and bear markets as an opportunity.
The stock market remains the easiest way to build wealth over the long run. The harder you try to speed up the process, the more likely you are to lose money.
So, what’s the plan? When the market is up, let your portfolio run. When the market is down, buy more. Ignore the red numbers. Unrealized losses don’t exist unless you sell. That’s it. Simple.
Markets spend most of their time in a bull phase. The big declines? They’re rare and short-lived. Outside of extreme cases like the 1940s, 1970s, or Japan in the 1990s, bear markets come and go quickly. So why worry about something so temporary?
And yet, the perma-bears will always be there. They never think it’s a good time to buy. They always wait for more “clarity.” But here’s the truth: Waiting never works. If you’re sitting on the sidelines, you’re already behind.
So, how do I handle all of this in my portfolio? I’ve lived through plenty of up-and-down cycles. My strategy remains the same: Underperform in bear markets, and crush it in bull markets. No panic selling, no rebalancing. My portfolio stays put. Short-term paper losses? Irrelevant.
Late last year, I made a shopping list of high-quality stocks to buy during the next bear market. That list is ready. I’m just waiting for the right moment. When the market gets closer to the bottom, I’ll check my technical indicators (RSI, VIX, moving averages, market breadth, etc.) and start buying.
That’s exactly how I made my big moves in December 2018, March 2020, and September 2022. And I’ll do the same again.
Cheer the bull, cheer the bear.
