Be Fearful When Others Are Greedy, And Be Greedy When Others Are Fearful

On Friday 17 October, Warren Buffett, the world's most successful and noted investor, wrote an article in the New York times on the state of financial world. He commented that the financial world is in a mess and that in the near term unemployment with rise, business will falter and the headlines will continue to be scary.

Buffett, who is has been right in his investment decisions most of his life, intends investing his entire net worth into American equities in the near future. He quotes his simple rule for buying equities: 'Be fearful when others are greedy, and be greedy when others are fearful.' And most certainly fear is now widespread, gripping even seasoned investors. Buffett states that fears regarding the long-term prosperity of the nation's many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

While short-term movements of the stock market cannot be foretold the likelihood is that the market will recover, well before sentiment or the economy turns up. So, 'if you wait for the robins, spring will be over', he said.

Referring to the 1930's Great Depression when the Dow hit its low of 41 points on July 8, 1932, economic conditions kept deteriorating until Franklin D, Roosevelt left office in March 1933, and by that time the market had already advanced 30%.

I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: 'Put your mouth where your money was.' Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

Likewise, in South Africa, most sectors have declined over 40% and we advise that, for long-term needs, it is not in your interests to sit on cash to wait for the market to bottom. Follow the lead of Warren Buffett and invest in unprecedented bargains. The best and most cost-effective way is to look at equity unit trusts. Your patience will be handsomely rewarded

Silke Financial Services has the skill and expertise to advise clients on appropriate investments for all short, medium and long-term investment goals.