Let’s say you are a long-term investor who is not into timing the bottom of the stock market. After having seen the market falling into intense panic and fear over the past few weeks, you may wonder whether it is now time to buy stocks for their long-term value. No doubt, in this climate of intense volatility and fear in the market, stocks of good businesses along with the bad ones are indiscriminately sold. Even if a depression is coming, not all businesses will be affected equally. Some of the better quality ones will fare better (and even thrive) in such a harsh environment. For example, during the Great Depression, some businesses’ profit even grew (see Which industry?s profitability grew as the Great Depression progressed?)!
Surely, some of these stocks are undervalued by now right? Should you buy now? Even Warren Buffett is buying.
Well, the answer will depend on your personal circumstances. More specifically, it depends on your current level of leverage. In other words, the right answer to this question for two different people can be different. In the coming articles, we will explain how to go about answering this question based on probability, reward and loss. Keep in tune!
Tags: leverage, value, Warren Buffett
