When it comes to the question of how to approach investing in 2020, Anet Ahern, CEO of PSG Asset Management suggests looking at what some of the world's best investors have to say.
"The single greatest edge an investor can have is a long-term orientation," according to Seth Klarman, CEO of the Baupost Group.
Any long-term investment strategy will be tested over time. A key component is how you, as an investor, will respond, explains Ahern.
Many investment gurus emphasise that it takes time for a strategy to work. Yet, when markets are struggling, it's easy to become short-term focused.
Some of the most admired investment businesses have been built over 30 years or longer, going through times of uncertainty and hardship. Those businesses that stuck to their well-proven processes lasted and flourished.
Buying when others are selling
"To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit," says John Templeton, founder of the Templeton Growth Fund.
Ahern says one should remember that the best investment decisions are often accompanied by some discomfort and uncertainty. The negative market environment in 2009 rewarded those who had the courage to invest then with a period of strong subsequent returns.
So, don't let discomfort drive you to capitulate on your long-term strategy.
"When you look at a stock, ask yourself: Is this an attractive business? Would I buy the whole company if I could?" suggests Pat Dorsey, founder of Dorsey Asset Management.
No amount of in-depth research can predict developments in the short term, but it is crucial for long-term success, according to Ahern.
She suggests you ask questions like whether the company is likely to be around in five years' time; if it is likely to make money in the next five years; and whether it is likely to be trading at a higher price-earnings ratio in the next five years.
If the answers are all yes, investors are likely to get a good return from the investment in the long run.
Margin of safety
"Confronted with a challenge to distil the secret of sound investment into three words, we venture the motto, 'margin of safety'," Benjamin Graham, regarded as the "father of value investing".
Ahern explains that, just because you want to invest in a "fantastic, failsafe" company, doesn't mean that you should do so at any price.
"Margin of safety" is the difference between a company's prevailing market value (its share price) and its intrinsic or fair value.
"Once the share price moves up to a point where it does not compensate you for the risk that you inevitably take when buying a share, it’s time to sell," suggests Ahern.
Pessimism is your friend
"When investing, pessimism is your friend, euphoria the enemy," according to Warren Buffet, CEO of Berkshire Hathaway.
Ahern says that, while it is important to avoid getting swept up in prevailing hype or gloom, it is equally important not to ignore the narrative altogether.
"That said, some of the best investment opportunities can arise from strong negative narratives. In fact, they are often a necessary pre-condition to finding quality companies at attractive valuations," she adds.
"Before you throw in the towel at a point of deep pessimism, make sure you understand why you are doing so, and why you have greater confidence in your alternative option delivering the long-term returns you require."
* Compiled by Carin Smith