When Warren Buffett speaks the market listens. He made history last week when he gave Berkshire Hathaway’s first ever virtual annual meeting.
10 of the most interesting takeaways from the event were:
- He is optimistic on stocks long-term. He pointed out that every $1 invested when he graduated from university in the 1950s, would now be worth about $100. That’s the power of compounding.
- He explains why he sold his airline stocks – Berkshire sold the four largest US airlines. He believes the world has changed for the airlines.
- He supports the US Federal Reserve’s decision to help the US Stock Market. Despite this, Berkshire always prepares for unexpected situations, so doesn’t want to rely on the response of the central banks to intervene in the market.
- Fearful people shouldn’t invest. As per the first point, he advises people buy should stocks now provided they are long-term. However, he says that those that “can’t handle fear” shouldn’t be in the markets. In fact, he advises that you shouldn’t even look regularly at your valuations, or pay much attention to it. The comparison is between investing in stocks and farmland. If you bought a plot of land, you wouldn’t care what the value is tomorrow or next month. Investing in stocks should be similar.
- Nobody can time the stock markets. In this context, that means that nobody can pick the bottom of the stock market decline. We might have seen the bottom in March, but nobody knows.
- Declines and losses aren’t the same thing. If you are down 50% or more in a position, you shouldn’t panic, assuming that you are comfortable with the asset itself. In fact Berkshire’s stock has gone down 50% three times in history, but that hasn’t stopped buy and hold investors from profiting from it.
- Never use borrowed money to invest. Even though stock markets are a great long-term bet, you should never use borrowed money to participate in the markets.
- Fear is part of human nature, but strikes some people more than others. In the same way that corona affects some people more than others, fear strikes some investors more than others. Handling emotions is one of the most important aspects in investing. Sometimes it is even more vital than technical knowledge
- You should buy and hold over 20-30 years +. Nobody knows, including him, whether you will be up in 1-2 days, months or years. Long-term, you shouldn’t bet against corporate America or the world.
- The insurance industry won’t be as affected as some other Berkshire businesses – in comparison, some of the other businesses in their portfolio might face a slower recover time.
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Further Reading
Do many investors assume they are smarter than Soros and Buffett?
