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How one billionaire handles market catastrophes

By Dian Vujovich

Only a few weeks ago investor sentiment was running high with research showing the little guy and gal plowing money back into the stock market. Then along came Japan and now Libya. Both rattling investors’ nerves and dragging down year-to-date mutual fund returns.

As of March 17, the average stock fund that Lipper tracks—there are 13,158 of them—was up a mere 0.2 percent for the year and the average US Diversified fund—there are 8,099 of them—up 1.27 percent. The average Japan fund however was down 9 percent year-to-date. That’s a drop of about 9 percent in one week on Japanese funds and resulted in a fall of 2-year average returns as well. They went from 27.5 percent to 21 percent.

That said, the Nikkei average closed up on Friday but ended the week down about 10 percent—the biggest weekly drop for that index in two years.

As pointed out in previous blogs, a crisis means opportunity for seasoned investors. Warren Buffett is one of them. In a recent Reuters column, he was quoted as saying: “”It will take some time to rebuild, but it will not change the economic future of Japan…”If I owned Japanese stocks, I would certainly not be selling them….”

Buffett went on to say: “Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don’t think Japan will be an exception.”

Of course, Buffett takes a long-term view of investing. He’s not a hit and run kind of investing guy—and that’s saying something for an 80-year old.

If you like his style, perhaps his words of wisdom are worth heeding.

To read more articles, please visit the column archive.

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