Here’s the good news. Share prices are falling. Investors are panicking. Talk of crisis dominates the headlines. These are precisely the conditions in which bargains tend to become available on the stock market. Just as history is written by the victors, so the day-to-day stock-market narrative is written from the perspective of those with most to lose: those who already have wealth, not those who need it in the future.
Yet when it comes to investment, as all great investors know, what matters most is how cheaply you can buy, not whether the market is going up or down around the time you do so. The younger you are, the more of your working life that lies ahead, the better a good stock-market disaster is for the value of your savings when you will finally need them, which is typically many years ahead.
Anyone who bought shares in the dark days of late 2008 or early 2009, when the banking crisis was at its height, will most likely have doubled their money since then. Because you bought them when they were cheap, those shares will remain a good purchase for the longer term, even if, as remains a distinct possibility, the world now plunges into a second banking crisis triggered by the collapse of the eurozone.
Shares acquired in the days when the market was booming — remember 2005 when, incredible as it now seems, voters gave Blair and Brown a third term because everything was going so well? — won’t make much money for years to come, since they were trading on expensive multiples at the time. The moral is clear: if you are not thinking about how cheap things are when you buy them, you are never going to prosper as an investor.
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