Warren Buffett’s survival kit for stock market investors

When stock markets are this unpredictable, it pays to listen to a professional investor who has seen it all before. It is why interactive investor’s head of equity strategy Lee Wild spoke to Keith Ashworth-Lord, manager of the Sanford Deland UK Buffettology fund and the UK's very own Warren Buffett, about how you should invest during a bear market.

[Video filmed on 27 April 2020]

Lee Wild, head of equity strategy at interactive investor:    

Now, it’s been one of the most eventful periods in stock market history, and that’s to put it lightly. You’ve been fairly active, as we’ve talked about, in a market that might scare a lot of investors, especially those who are fairly new to the game, who didn’t see the financial crash in ’08, ’09. For them, how do you buy? Talking about tips really, a bit of advice for buying in this kind of market. How do you buy into a falling market? How would a retail DIY investor do that?

Keith Ashworth-Lord, manager of the Sanford DeLand UK Buffettology Fund:

Well, I go back to this survival kit for bear markets, as I call it. I think the best way you can play bear markets, if you want to use that term, is just to steadily pound cost average down and just almost say to yourself “I’ll buy some one month, I’ll buy some the next month and I’ll wait for a rotten day in the market to do it, but I won’t commit all my capital – I’ll keep firepower dry” and almost admit to yourself, you’ll be very lucky if you fully invested just at the point when the market turns.

You’d be incredibly lucky. So you’ve got to admit to yourself that you might not get all the capital into the market at the point when it suddenly turns, but I think the key thing is not to lose your nerve because every time you buy and the market takes another lurch down, you feel sick.

And there will come a point when you just feel so sick that you don’t want to do it again and that’s usually the point of capitulation, when things turn and start to go the other way.

So the only thing I can say is just be confident in your own ability to navigate yourself through and try and learn from what you’ve seen in the past and just keep calm and carry on, I suppose is the message.

And if you can’t do that, then maybe you should be asking yourself “ought I to be in equity markets?” You know, Warren Buffett always says “if you can’t stomach a 30 to 50% fall in your portfolio, you shouldn’t be in equities, because it’s going to happen sometime”. And it does. You just have to be wired for it, I guess.

Watch our other videos with Keith Ashworth-Lord here:

• Buffettology fund: top 10 stocks and a buying spree 
• Buffettology fund interview: why I love a market crash

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