It is this uncertainty that has resulted in highly volatile sharemarkets across the globe. On release of positive economic data share markets have risen sharply, only to retreat again on first sign of a prolonged slowdown. This phenomenon proves that there are two main factors that drive markets in the short term: fear and greed.

It is greed that drives the sharemarket to unsustainable and irrational heights as investors are tempted to chase the next hot stock, sector or asset class. Whilst on the other hand, fear of losses increases the desire to sell of out risky assets (shares and property) and shift to less risky assets such as cash and fixed interest.

As investors, it is the following quote form Warren Buffett that we should constantly revisit during times of uncertainty and times of optimism.

Occasional outbreaks of those two super-contagious diseases; fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

– Warren Buffett, 2001.

Following on from the above words of wisdom, the key to sound investment strategy is patience, with a keen eye for the undervalued potential of quality long term investments. It is “time in the market” not “timing the market” that will deliver strong investment returns over the long term.