Back in September, Warren Buffett swooped in and invested $5 billion in Goldman Sachs (NYSE:GS) and another $3 billion in General Electric (NYSE:GE). Both came in the form of preferred stock with warrants that allow Berkshire Hathaway (NYSE:BRK-B) to buy an equal additional amount of common stock at what was then a fat discount.

Bad timing?
Since then, shares of both companies have been an absolute disaster: Goldman is down around 59%; GE is off 41%. Buffett might have bought preferred stock on enviable terms, but the trend is more or less the same: He's down. Big time.

Now, if that's as far as your curiosity took you, you'd probably conclude that the world's greatest investor was either early or dead wrong about these two companies. And if he can't get it right, can anyone? Is investing just a sucker's game?

Patience, grasshopper
It's true that investing is a sucker's game in the short term. One of the most important Buffett-isms is that his favorite holding period is "forever." That's important, because it captures two of Buffett's key beliefs: (a) compounding is a beautiful thing, and (b) what happens in the short term is completely out of your control.

Perhaps the best illustration comes from checking out Buffett's annual reports. They include a list of the largest publicly traded companies in Berkshire's portfolio, along with the prices paid and the current value of those investments. That list includes the big ones -- Coca-Cola (NYSE:KO), Wells Fargo (NYSE:WFC), and Procter & Gamble (NYSE:PG) -- but the company that sticks out like a sore thumb is Washington Post (NYSE:WPO).

Why does it stick out? Because Berkshire paid just $11 million for an investment worth nearly $1.4 billion at the end of 2007 -- a 127-bagger! Of all the stocks listed, Washington Post is the biggest gainer -- by a factor of 12. While relatively small in dollar terms, it'll certainly go down as one of Buffett's greatest investments. 

But do you know what happened to the stock right after Buffett began buying shares in 1973? Shares plunged 20% and stayed there, not for a few months, but for three years. It was 1976 before Buffett was in the black, and it was 1981 before WaPo traded at Buffett's estimate of its 1973 intrinsic value.

Think about that: What ultimately became one of Buffett's greatest investments began with three years of double-digit losses and mind-numbing stagnation. Patience pays, Fools.

Here's another example. In 2002, Buffett disciple Mohnish Pabrai began purchasing shares of Universal Stainless & Alloy Products for around $15 per share. Over the next three months, shares fell by more than 60%. What'd he do? He knew his investment thesis was rock-solid, he stuck to his guns, and he waited -- and he ended up more than doubling his original investment by 2006.

In September, I had the chance to sit down with Pabrai -- and I brought up the fact that famed mutual fund managers such as Bill Miller and Richard Pzena were having absolutely terrible years. Without hesitating, Pabrai interrupted with a powerfully straightforward response: "Don't be surprised if those guys end up outperforming the market by enormous margins over the next few years."

Be patient. Be brave. Be bold.
Fools, 2008 is shaping up to be the worst year in the stock market since 1937 -- and no one knows where the bottom is. Thankfully, you don't have to know. As Buffett's investment in Washington Post proves, finding the bottom and knowing exactly when things will perk up isn't nearly as important as:                                                                           

  • Buying great companies.
  • Paying bargain prices for them.
  • Holding them indefinitely.

Right now, that's exactly what you should be doing. In fact, Buffett himself recently shifted nearly his entire non-Berkshire net worth into U.S. stocks and suggested that others should, too. "What is likely, he said, "is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over."

So don't wait for the robins -- start searching out those great companies at bargain prices, and be prepared to be patient. If you need a place to start, our team at Motley Fool Inside Value is sifting through the rubble in search of great opportunities. To see what they're recommending right now, click here to try the service free for 30 days. There's no obligation to subscribe.

Fool contributor Morgan Housel owns shares of Berkshire Hathaway.Coca-Cola and Berkshire Hathaway are Motley Fool Inside Value selections. Berkshire Hathaway is a Motley Fool Stock Advisor pick. The Fool owns shares of Berkshire Hathaway. The Motley Fool is investors writing for investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.