Warren Buffett offers up some tangible advice for value investors during this period of heightened uncertainty.
Warren Buffett was the star of the investment world over the weekend. The Oracle of Omaha displayed incredible stamina as he gave a four-and-a-half-hour presentation at Berkshire Hathaway’s annual meeting. I sifted through Buffett’s long virtual talk and found five great pieces of investment advice that you can apply now.
The coronavirus-induced panic in March was considered by some to be a Black Swan event. Many investors got liquidated as they had no idea the pandemic was going to crush the stock market. Buffett uses the pandemic to illustrate why it’s not a good idea to invest borrowed money:
When something like the current pandemic happens, it’s hard to factor that in. That’s why you never want to use borrowed money, at least in my view, into investments. There’s no reason to use borrowed money to participate in the great American tailwind, but there’s every other reason to do so.
Retail investors typically pay market analysts to get timely stock picks. The legendary investor discourages this practice. Buffett says it is better for average investors to buy the broad market and hold on to their investments.
In my view, for most people, the best thing to do is owning the S&P 500 index fund. There are huge amounts of money people pay for advice they really don’t need. If you bet on America and sustain that position for decades, you’d do far better than buying Treasury securities, or far better than following people who tell you what to invest.
Warren Buffett recommends buying an index fund. | Source: Twitter
The uncertain nature of investments is why people should only invest what they can afford to lose. At Berkshire’s annual meeting, Buffett emphasized that no one knows how the market will perform in any timeframe.
Perhaps with a bias, I don’t believe anyone knows what the market is going to do tomorrow, next week, next month, next year… You’re going to have to be careful about how you bet simply because markets can do anything.
Over the weekend, news broke that Buffett dumped all airline stocks in April. Even the legendary investor gets it wrong sometimes. It literally happens to the best of us. Buffett says,
When we bought [airlines], we were getting an attractive amount for our money when investing across the airlines. It turned out I was wrong about that business.
You just had to believe that the American miracle was intact. You didn’t have to read the Wall Street Journal. You didn’t have to look at the price of your stock. You didn’t have to pay a lot of money in fees than anybody…Nothing can stop America when you get right down to it.
Investing doesn’t have to be complicated. Warren Buffett stays true to his form of long-term and fundamentally sound investing.
Disclaimer: The opinions expressed in this article do not necessarily reflect views of CCN.com and should not be considered investment advice from CCN.com.
This article was edited by Sam Bourgi.
Last modified: May 8, 2020 11:59 AM UTC