Buffett buys big, and wise investing tips from four legends

When the going gets tough, the tough get buying. Warren Buffett plonks $10 billion down on IBM. European crisis? What crisis, writes The Motley Fool.
Investing is a marathon, not a sprint. This European sovereign debt crisis will pass, one day.

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 When the going gets tough, the tough get buying. Warren Buffett plonks $10 billion down on IBM. European crisis? What crisis, writes The Motley Fool.

Another day, more ups and downs on world sharemarkets.

Europe continues to dominate the news, and the direction of markets.

"There's a lot of risk to the global financial system," said Hayes Miller on Bloomberg. "The size of the problem is huge. Until you solve this problem, you aren't getting rid of the risk [of] a large-scale default."

Beer, wine and mud
We thought we'd bring in our our European correspondent, Klaus von-Fool Schmidt-Motley for the latest on the situation over there…

"The euro is ultimately doomed. The politicians are simply shuffling the deck chairs.

Papandreou replaced by Papademos…is that going to make a massive difference? The names are virtually the same.

And then there's bunga-bunga Berlusconi. The Italian prime minister is gone, likely replaced by Mario Monti, a name that brings back memories of that great wrestler from the 1970s, Mario Milano.

We are all simply waiting for the European politicians to bring in the bazooka gun to solve the problem once and for all.

If Italy doesn't get you, Spain will. And what about France? They are no pin-up boys when it comes to debt, early retirement, red wine and cheese. It's late here, I'm off for some more beer and sauerkraut. "

Thanks Klaus. As ever, the situation is rapidly changing and as clear as mud.

Time to panic?
As investors, what are we to do? Panic now, sell everything, and wait for the bazooka?

We're not suggesting that for one moment.

Timing the market, selling everything in anticipation of a sharemarket crash, is pure folly. You are bound to sell too late, and miss the subsequent rebound. The time to sell is when all is calm, the outlook is rosy, and share prices are riding high. That time is not now, in case you came down in the last shower.

Instead, we suggest you keep adding to the market on a regular basis.

Buy some more of your favourite stocks, companies like Telstra Corporation Limited (ASX: TLS), a company our Investment Analyst Dean Morel has consistently named as his one ASX share to buy in today's irrational sharemarket. In a sharply falling market, Telstra's share price has shone out as a beacon of stability.

Or instead how about QBE Insurance Group Ltd. (ASX: QBE), one of the five companies Dean recently named as members of his ultimate high yield dividend portfolio?

Just today Commonwealth Bank of Australia (ASX: CBA) has reported a cash profit of $1.75 billion in the three months to September, up 9.4 per cent. Although it's not Dean's favourite Aussie bank, CBA are still travelling reasonably well, thank you very much.

A crisis quickly forgotten
Investing is a marathon, not a sprint. This European sovereign debt crisis will pass, one day.

Does anyone remember the U.S. debt ceiling crisis now? Exactly our point.

Europe will be replaced by another crisis. That crisis will pass, and in time, another one will emerge. Imagine the crisis if the Australian cricket team is again bowled out for under 50…

In the meantime, the sharemarket, when measured over a number of years, will keep on climbing that big old wall of worry.

Foolishly educating, amusing and enriching
Dean is busy working on our forthcoming subscription-only newsletter. We've had many, many expressions of interest. Thank you.

We can only assume there are thousands of Australians crying out for high-quality, extensively researched and vetted individual share recommendations. In the highly conflicted world of financial advice, we aim to stand out as a beacon of integrity, as well as proving you with market-beating share picks.

As part of Dean's extensive work, he came across an article that pleasantly surprised him and over delivered on its headline promise. Wisdom of the Sages in The Weekend Australian Financial Review more than lived up to its title.

Wise investment tips
Dean presents us with a selection of the wise investment tips from four Australian investment sages.

Olev Rahn encouraged investors to be more active and to be prepared to sell the rallies and buy the dips during this bear market. Buy fear, sell greed never goes out of fashion, but works best during volatile markets. He also recommended lowering your weighting in equities and to look to dividends for income.

John Nolan likewise advised selling into rallies and buying if the market becomes cheap. He believes quality local and international shares are the most attractive they've been for many years. However, he cautions that the recovery from the debt binge will be protracted.

Mr Nolan recommended that if you can't afford to lose money in the 12 months, you shouldn't be in the sharemarket. We recommend those still working should double that time horizon, while retirees should hold 3-5 years' worth of income.

Merv Peacock believes politics more than the economy is responsible for this bear market. The strength of company earnings and balance sheets certainly seems to corroborate that view. He also recommended patience with investments that are made for sound reasons. Conversely he said to quit bad investments as they seldom get better.

A final piece of advice from Mr Peacock is particularly useful for retirees. He recommends keeping five years of proposed income in cash or equivalents and investing the rest as though you'll live to 100.

The final sage was Tom Hogg. We wonder if his co-workers call Mr Hogg the energizer bunny, as at 86 he still works three days a week. He recommends not rushing to buy. That's great advice as it gives your rational self the time to overcome your emotional need for action.

Mr Hogg recommended first time investors start with listed investment companies like Australian Foundation Investment Co.Ltd (ASX: AFI) and Argo. We naturally think that is great advice having recommended Argo Investments (ASX: ARG) here and here.

The article may be subscription only. We've added a link to it on our Twitter feed.

The entire article is well worth a read for the collective wisdom of four financial sages with over 150 years of collective investment experience. Olev Rahn has over 35 years' experience in the investment industry. John Nolan is the Managing Director and founder of Warakirri Asset Management. Merv Peacock retired as chief investment officer of AMP, after working for the company for 42 years. Tom Hogg has worked in stockbroking for 40 years.

More Foolish reading
What's the world's richest man, and greatest investor up to now? Obviously he's not spending his time following the European debt-crisis, or the comings and goings of Greek prime ministers.

The world's most successful investor, Warren Buffett, Chairman and CEO of Berkshire Hathaway (NYSE: BRK-A) overnight unveiled a significant new holding: a US$10.5 billion holding in IBM (NYSE: IBM).

If you've followed Buffett for any length of time, you're entitled to a double-take. After all, Buffett was the man decried as being 'past it' for sitting on the sidelines when the tech boom was in full swing.

Then when the boom went bust, Buffett was hailed for his discipline in not being swept up in the excitement of those years.

Read more…Buffett buys into IBM, by Scott Phillips.

Confessions of a Warren Buffett junkie
Our feature writer Scott Phillips (the person who writes our columns for The Sydney Morning Herald and The Age) is a self-confessed Buffett junkie.

And who can blame him? If you are going learn about investing, and keep learning, because in this profession you never stop learning, why not learn from the very best?

When the going gets tough, the tough get buying. The man who gets 'greedy when others are fearful' has been plenty greedy in the last 36 months. Buffett told an interviewer that he had done more buying on August 8th than on any other day this year.

Read more…Buy it like Buffett, by Scott Phillips

If you are looking for another stock you can bet on now, readers need look no further than The Motley Fool's Top Stock For 2012Click here now to request this special report, while it's still free and available.

Dean Morel has a position in Telstra. Bruce Jackson has an interest in Telstra, Westpac, CBA, AFI and Berkshire Hathaway. The Motley Fool has a wise disclosure policy.

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