When facing the volatile stock market, some investment masters on Wall Street gained fame and accumulated huge wealth by bravely catching the bottom, while others experienced painful losses.

Today, let's take a look at the experiences and lessons of these masters, and perhaps gain some inspiration from them.

Stock God Buffett

Quotations of Bottom Fishing

When the stock market is booming, resist greed and quit the market early; when the stock market is plummeting, counter fear and take the opportunity to catch the bottom for cheap. Buy more as it falls, instead of cutting losses and leaving the market.

Battle of the Bottom

Buffett experienced four stock market crashes in his life, in 1973, 1987, 2000, and 2008, respectively.

Before each stock market crash, Buffett would withdraw early, never participating in the last wave of market trading. He would calmly watch others make foolish moves in the market. When the market fell sharply, he would leisurely enter the market on a large scale to pick up the stocks he had previously been bullish on.

For example, during the 1987 stock market crash, when it fell 36% from August to October 1987, the stock market fell quickly and rebounded fast, leaving Buffett without time to "let the bullets fly."

Despite missing the opportunity during a sudden market crash, Buffett remained calm because he believed another opportunity would arise if he waited patiently.

The lesson that Buffett learned from this experience was that sometimes market crashes come as quickly as they go, leaving you unable to seize the bottom-fishing opportunities. In this situation, it's important to remain calm and not try to control your investment behavior by blaming yourself for missing every opportunity.

The following year after the crash, Buffett began buying a lot of Coca-Cola stocks. Within two years, he bought $1 billion worth of Coca-Cola stocks. By 1994, after continuous shareholding, his total investment reached $1.3 billion.

By the end of 1997, Buffett's holding of Coca-Cola stocks had grown to a market value of $13.3 billion, earning ten times his investment in 10 years.

Experience and lessons learned

Buffett's measures taken during stock market crashes mainly include three aspects:

First, select investment industries. Buy if the net assets far exceed the stock price.

Second, do value bands. He first calculated the intrinsic value per share through the overall value of the listed company and then compared it with the stock price. If the intrinsic value is significantly higher than the stock price, he buys and sells when the stock price is high.

Third, only use idle money for investment. Even when facing stocks that are expected to rise 100-fold in the next 10 years, Buffett insists on only using idle money for investment and waits for the opportunity in case of loss.

Peter Lynch

Quotations of Bottom Fishing

The historical law of stock market fluctuations tells us that all major declines will pass, and the stock market will always rise higher. Historical experience also shows that large stock market declines actually release risks and create good opportunities for investment to buy excellent company stocks at very low prices.

But buying the bottom is not so simple. Instead of constantly trying to buy the 'bottom' and constantly getting trapped, it is better to wait for the bottom to appear and then enter.

Battle of the Bottom

In 1987, when the US stock market crashed, many people went from millionaires to destitute, and even had mental breakdowns and suicides. At that time, Peter Lynch, a superstar in the US securities industry, managed the Magellan Fund with over 10 billion U.S. dollars. In one day, the net asset value of the fund fell by 18%, and the loss was as high as 2 billion U.S. dollars.

Like all open-end fund managers, Lynch had only one choice: sell stocks. In order to cope with the unusual large amount of redemption, Lynch had to sell all his stocks.

More than a year later, Peter Lynch still recalls being afraid, 'At that moment, I really couldn't be sure if it was the end of the world, or if we were about to enter a serious economic depression, or if things weren’t so bad yet, and it was just Wall Street about to be doomed?'

Afterwards, Peter Lynch continued to experience many stock market crashes, but still achieved very successful performance.

Experience and lessons learned

First of all, do not sell all stocks cheaply because of panic. If you sell stocks in a stock market crash, your sale price will often be very low.

The trend in October 1987 was terrifying, but there was no need to dump stocks on that day or the next. The stock market began to rise steadily in November of that year. By June 1988, the market had rebounded by more than 400 points, which means the increase has exceeded 23%.

Secondly, there must be firm courage to hold good company stocks.

Thirdly, you must dare to buy good company stocks at a low price. A stock market crash is the best opportunity to make big money: huge wealth is often only available in such stock market crashes.

Graham: The Father of Wall Street

Quotations of Bottom Fishing

First, never lose money; second, never forget the first item.

Battle of the Bottom

Graham is Buffett's mentor, the father of securities analysis, and the pioneer of value investment. In September 1929, the Dow Jones Industrial Average rose to its highest point of 381 points and then began to fall.

On October 29th, Dow Jones Industrial Average fell by 12%, which was described as the 'worst day' in the 112-year history of the New York Stock Exchange. This is the most famous 'Black Tuesday' in history.

In November 1929, the Dow Jones Industrial Average hit a low of 198 points, and then stabilized and rebounded. By March 1930, it had risen to 286 points, with a rebound of up to 43%.

So many investors thought that the worst time had passed and that the stock market would make a big turnaround. Graham also thought so, so he started buying stocks at the bottom.

He bought only good stocks that were very cheap from a value perspective, and to achieve a higher rate of return, he also used margin to leverage his positions.

But the stock market rebounded until April and then began to collapse again. The Dow Jones Industrial Average fell 33% in 1930, while Graham-managed funds lost as much as 50.5%.

By July 1932, the Dow Jones Industrial Average had reached its lowest point of 41 points, a maximum drop of 89% from its high of 381 points. During the same period, Graham-managed funds lost as much as 78%, almost bankrupting him in this super bear market.

Graham later regained success and wrote the investment bibles "Security Analysis" and "The Intelligent Investor," summarizing an eternal value investing principle: margin of safety.

Experience and lessons learned

Safety first, profit second.

Bill Miller: Contrarian Genius

Quotations of Bottom Fishing

I often remind my analysts that you represent 100% of the information about the company, and 100% of the valuation of the stock depends on the future.

Battle of the Bottom

Miller-managed Legg Mason Value Trust Fund had beaten the S&P 500 index continuously from 1991 to 2005, creating the most brilliant fund manager performance record ever, and was hailed as the most successful fund manager of the era. However, in just one year, he destroyed this honor himself.

In the subprime crisis, many originally excellent company stocks fell sharply one after another. Miller believed that investors overreacted and bought in counter-cyclically. He thought that the crisis was a good opportunity to make money, but it turned out to be the most disastrous bear market after the Great Depression.

Although his contrarian investment decisions in the past 15 years have proven to be correct, this time he failed miserably. Miller's stock list is like the "Martyrs List" in this crisis: AIG, Bear Stearns, Fannie Mae, Citigroup, Washington Mutual Bank, etc.

In 2008, the 58-year-old Miller said in an interview:"I didn't estimate the severity of this liquidity crisis properly from the beginning."

Although Miller often made money from market panics before, he said that this time he didn't expect the crisis to be so serious, and the underlying problems were so deep that even high-quality listed companies that once were market leaders all fell down.

"I still lack experience," Miller said, "every decision to buy stocks is wrong, it's really scary."

Experience and lessons learned

"Any investment portfolio that performs abnormally well can succeed for a period of time because it has the insurance of price discrepancies. The market's estimate of this future number is wrong."

We use various factor combinations to compare the market, the valuation of this company, and our own valuation of the company to find price discrepancies.

Philip Fisher: The Father of Growth Stock Value Investing

Quotations of Bottom Fishing

You should take a lot of time to study and not rush into buying. In a continuous bear market, do not buy stocks that are not familiar to you too quickly.

Battle of the Bottom

In 1929, the US stock market was in a crazy bull market before the collapse, but Fisher found that the prospects of many US industries were not stable and the stock market had severe bubbles. In August 1929, he submitted a report to senior bank executives entitled "The most serious major bear market in 25 years is about to unfold."

This can be said to be Fisher's most admirable stock market prediction in his life, but unfortunately he "shorted and went long".

He said: "I can't help being fascinated by the power of the stock market. So I tried to find some relatively cheap stocks everywhere because they had not risen enough." In October 1929, the US stocks suddenly collapsed, and Fisher was not spared. In the stock disaster, he suffered heavy losses, and Fisher lost everything.

Experience and lessons learned

Fisher began to understand that the main factor determining the price of a stock is not the P/E ratio of that year, but the expected P/E ratio of the next few years.

He said that if you can cultivate your own ability and determine the possible performance of a stock for the next few years within a reasonable range, you can find a key, not only can avoid losses, but also make a lot of money.

Editor/tolk