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Billionaire investor Howard Marks: It's time for investors to play offense

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Victor J. Blue | Bloomberg | Getty Images

Famed investor Howard Marks, a billionaire and founder of the investment firm Oaktree Capital, has a message for investors in the midst of the coronavirus outbreak: Now is a time to buy.

"I feel it's a time when previously cautious investors can reduce their overemphasis on defense and begin to move toward a more neutral position or even toward offense," Marks wrote on Monday in his latest memo to clients about the state of the markets. Playing "offense," in this case, means that investors take advantage of down markets by buying investments.

Marks, who periodically publishes these memos, is an accomplished author and influential investor — and typically, when he has something to say about the markets, people on Wall Street listen. And he's often talked about why investors shouldn't fear down markets. "Investors should be aggressive when prices are low," Marks told a high school investing club last year, "and defensive when prices are high."

In this latest letter, Marks writes that because many investors have already sustained losses during the market's significant downturn in recent weeks, they should quit worrying so much about the potential for further drops and start thinking about how they can benefit in the long run when the market rebounds.

"With part of the crisis-related losses already having taken place," Marks writes that he's "less worried about losing money and somewhat more interested in making sure our clients participate in gains."

Although the markets may be "considerably lower" in coming months, he writes, "we're buying today when we find good value."

Investors should be aggressive when prices are low, and defensive when prices are high.
Howard Marks
Founder of Oaktree Capital

Why down markets can be a good thing for investors

Marks isn't the only financial expert recommending that people look for opportunity in down markets. In February, Warren Buffett offered a similar view in an interview with CNBC, saying that most investors should embrace market bumps: "It gives you a chance to buy something that you like, and you can buy it even cheaper."

Investing when the market is down "allows you to take advantage of a process called dollar-cost averaging," says Niv Persaud, a certified financial planner and managing director at Georgia-based Transition Planning & Guidance.

Dollar-cost averaging helps smooth out the average cost of investments over time, ensuring that you don't invest all your money when the stock market is at a record high. During periods of market bumpiness — like we've experienced recently — dollar-cost averaging also helps investors to take advantage of lower prices.

"In the long term, it's all going to average out," Persaud says.

For that reason, experts say investors really shouldn't fear down markets: They may actually be a good thing, especially for young investors.

And it's particularly important to keep in mind that, throughout history, every market downturn has eventually ended in an upturn. Investors who stay the course now and continue investing regularly stand to gain later.

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