What type of share market investor are you?
Someone who invests for the long-term, with the ambition of holding onto their investments for a period of three to five years, or longer?
Someone who intends staying invested, through the good times and the bad – perhaps even doubling down on their investments when the going gets tough and shares are cheaper?
There's nothing better than sitting back and letting the twin powers of time and compounding returns weave their magic on your portfolio… turning modest sums of money into small fortunes.
Intentions are one thing, but reality is another…
The fact is, while most people say they're invested for the long-term, they're really looking over their shoulder – constantly fearing the market's next big threat and ready to sell out at a moment's notice.
So I'll repeat my initial question, albeit with a slight twist…
What kind of investor are you, really?
Individuals are discovering the answer to that question this week with the market facing a new crisis.
By now, I'm sure you're aware the local share market is officially in a 'technical correction' – defined as a fall of 10% or more since its peak.
In fact, the S&P/ASX 200 (ASX: XJO) hit a fresh seven-month low this morning, hovering below the 5350 point mark.
Investors all over the country are feeling the pain with the 'Big 4' banks amongst the hardest hit.
Commonwealth Bank of Australia (ASX: CBA), for instance, is down 16% since its March peak.
Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) have fared even worse – they're both down 20%.
And that may not be the worst of it… there is potential for even further falls, especially if the banks are forced to raise up to $25 billion in extra capital, as some experts suggest will happen.
Throw in sluggish global growth, plunging commodity prices and the devaluation of China's yuan, and short-term traders have plenty of reasons to be concerned.
As 'Foolish' investors know, selling in a fit of panic is one of the quickest and surest ways to lose money…
Like you, I'm not in this investing game to lose money. So rather than be fearful of the market's falls, I look at these inevitable share market dips as opportunities to snap up shares in some of my favourite companies.
As Warren Buffett famously said "Be fearful when others are greedy and greedy when others are fearful."
Buffett recently did just that, acquiring the US-based Precision Castparts for a whopping $50 billion!
Before that, he invested $500 million in the local Insurance Australia Group Ltd (ASX: IAG), receiving 3.7% of the business in the process.
The point is, Buffett has mastered his emotions and focuses on buying high-quality companies at reasonable prices, paying little attention to what the market itself is doing.
We give this advice to members of Motley Fool Share Advisor, many of whom have made remarkable gains by simply ignoring the market's mood-swings.
Those investors who have taken advantage of those mood-swings have likely done even better.
Take Integrated Research Limited (ASX: IRI) as a perfect example.
Our first ever pick, the software business has soared 435% since December 2011 compared to a 45% return for the All Ordinaries.
Corporate Travel Management Ltd (ASX: CTD) has also generated enormous returns for members who followed Scott Phillips' advice, rising 377% since his initial recommendation.
Granted, there's no way of knowing where the market will go tomorrow, next week, or even next year.
But your biggest risk is not that a market crash could be just around the corner.
Instead, it is that you will sell your shares out of fear, or else miss the incredible buying opportunities presenting themselves.
I recently put some of my own money to work in a company I believe could be much bigger ten years from now.
Due to The Motley Fool's strict trading rules, I'm not allowed to name the company for at least two days after the trade is executed.
But I can tell you that there are plenty of other great businesses on my watchlist, including REA Group Limited (ASX: REA) and the explosive Catapult Group International Ltd (ASX: CAT), plus Motley Fool Share Advisor's most recent ASX recommendation, a company I believe could be an excellent pick-up for long-term investors, especially at these lower prices.
If you haven't yet taken advantage of the market's most recent dive, it could be time to rectify that situation…
