(Bloomberg) -- Some traders say you should never try to catch a falling knife, but Howard Marks begs to differ.

That’s exactly what investors should be doing, according to the billionaire co-founder of Oaktree Capital Group LLC, who says the recent sell-off in U.S. equities was a case in point. As timing the bottom is impossible, the trick is to buy assets as they decline, before they start to appreciate, Marks said.

“When stores put goods on sale, I buy more,” he said at a Bank of Singapore event Monday. “Why would you possibly want to buy more at rising prices?”

Markets are not at extreme bubble levels and so are unlikely to see extreme crashes, according to Marks. But because we’re in the “eighth inning” of the market cycle, now is a time to be more cautious than aggressive.

He said the rout in U.S. shares in the fourth quarter of last year was an example of how sentiment can suddenly shift from excessive optimism to excessive pessimism, even though fundamentals didn’t change. The S&P 500 Index tumbled almost 20 percent from late September through a low on Christmas Eve. Since then, it recovered more than 10 percent through Friday’s close.

“We had one of the most violent downdrafts” that “I had ever seen,” Marks said. “Nothing much changed except people were first ignoring the bad news and then they were obsessing about the bad news.”

The sell-off was a buying opportunity for investors able to ignore their emotional responses, according to Marks.

“I like things better when they are on sale, so December was a better time to buy,” he said. “I don’t believe that prices having been rising is a reason to buy, and I also don’t think the fact that prices have been falling is a reason to sell. And if anything, some of the overpricing was reduced a little bit.”

Here are some other comments Marks made:

  • Oaktree, which secured capital commitments of about $8.5 billion in 2015 to prepare for market duress, has started deploying some of that money over the past year. Marks didn’t elaborate on where he was investing the capital.
  • With the recent rebound in risk assets, Marks said he’s unsure how quickly Oaktree will invest its funds. At a discussion earlier in the day in Singapore, he said trends are favoring distressed-debt and value investors, though “we are not there yet.”
  • Emerging markets generally and Asian markets are relatively cheap. Oaktree is giving “a lot of attention” to emerging-market stocks and bonds, Marks said.

To contact the reporters on this story: Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net;David Yong in Singapore at dyong@bloomberg.net;Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net, Tom Redmond

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