Yahoo Finance Warren Buffett's advice on investing during uncertain times
Covid-19 has seen the stock market careen from one extreme to the next, and less experienced investors may have thrown up their hands and given up.
But the so-called ‘Oracle of Omaha’, US conglomerate Berkshire Hathaway chief executive Warren Buffett, is known for holding his ground when other investors flee.
Speaking recently to Yahoo Finance US editor-in-chief Andy Serwer ahead of the 2020 Berkshire Hathaway annual shareholder conference, the investment veteran warned that investing the stock market comes with inherent risks.
“Markets, if [it has] to be open second by second, they react to news in a big-time way,” he said.
“It’s not like the market for real estate or farms or things of that sort. So you have to have a price of assuming,” he said.
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In Buffett’s 2015 annual letter to shareholders, he advised investors not to fear volatility – and to invest with a long-term view in mind.
"For the great majority of investors, however, who can – and should – invest with a multi-decade horizon, quotational declines are unimportant. Their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime,” he wrote.
The pay-off of investing in stocks will be greater than that of investing in cash, he added.
“For them, a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities.”
If that didn’t really make sense to you, he’s spoken extensively over the years about this topic before.
The essence is basically: volatility is an opportunity, don’t obsess over the news, and be in it for the long haul.
“Widespread fear is your friend as an investor because it serves up bargain purchases,” he said.
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Learn how to tune out the daily news cycle, Buffett has also indicated, lest you give up a good investment.
“Don't watch the market closely,” Buffett said in 2016.
“If they're trying to buy and sell stocks, and worry when they go down a little bit … and think they should maybe sell them when they go up, they're not going to have very good results.”
And finally: you have to believe in the company whose shares you’re buying.
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Berkshire Hathaway’s 2020 annual shareholder conference will be exclusively live-streamed by Yahoo Finance. Watch the conference at Yahoo Finance 6am this Sunday AEST.
