“I think you can be quite sure that over the next ten years there are going to be a few years when the general market is plus 20% or 25%, a few when it is minus on the same order, and a majority when it is in between,” Buffett wrote. “I haven’t any notion as to the sequence in which these will occur, nor do I think it is of any great importance for the long-term investor.”
Ariel Hsing was 11 when Warren Buffett first recruited her to play ping pong at the Berkshire Hathaway annual meeting. Now she’s America’s top-ranked under-18 player and No. 2 overall.
This letter hasn’t received much attention lately, for good reason: It’s dated July 6, 1962.
Half a century on, Buffett’s advice to ignore market gyrations still resonates. Yet many investors have trouble looking ahead 10 days, let alone 10 years. Of course, investors nowadays have justifiable fears about their money and who’s minding it. The safe return of capital is paramount, while the idea of losing your shirt in a bid for a meaningful return is paralyzing.
So what’s new? Risk aversion is hard-wired in human nature. A greedy market feeds on fear. Otherwise Buffett wouldn’t have needed to remind investors to keep a lengthy time horizon.
Investors in 1962 had something to be scared about. The Cuban Missile Crisis wouldn’t take the world to the nuclear brink until October, but the Cold War between the U.S. and the former Soviet Union was heating up. The Dow Jones Industrial Average DJIA +0.02% tumbled 23% in the first six months of 1962, erasing its 22% gain of the year before. That May 29 a “flash crash” shaved almost 6% off the Dow in a single day.
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