Just when the U.S. economy seemed to be hitting its full stride for the first time since the Financial Crisis, concerns over China’s economy have U.S. stocks once again on shaky ground. However, the recent short-term market weakness provides a useful reminder for long-term investors: the market can be extremely unpredictable from day-to-day.
Guessing which way the market is headed in a given week, month or year is extremely difficult, if not impossible. If you are relatively new to investing and have gotten burned trying to guess short-term market moves, don’t feel bad. Some of the greatest minds in investing can’t always predict the market.
Buffett’s Blunder
Between 2006 and 2008, one of the most iconic investors of all time, Warren Buffett, took a massive 5.7 percent ownership stake in ConocoPhillips COP 5.01% just when the oil market was peaking. From 2007 to 2008, this single investment cost Buffett’s company Berkshire Hathaway Inc. (NYSE: BRK.B) about a $2.6 billion paper loss.
The fact that one of the most successful investors of all time can screw up so bad in timing the market is even further evidence that it isn’t as easy as it may look. However, just because the market is nearly impossible to predict in the short-term doesn’t mean that long-term investing isn’t a very powerful tool.
Diversification + Time = Profits
Including all the up years and down years and market crashes, depressions, recessions, booms and busts, from 1900 to 2000, the U.S. stock market produced…
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