The media have been reporting on the key takeaways from the annual Berkshire Hathaway meeting, where Warren Buffett and his business partner Charlie Munger gave their opinions on a range of matters.
I have included some links and articles below this podcast to illustrate some of the wider points made, including on inflation, index funds and much else.
However, what was the one big takeaway that people should have listened to? That is the topic of the podcast below.
If you want me to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.
To give credit to the original authors I have copied the articles below
Investing legend Warren Buffett shared some words of wisdom during the annual Berkshire Hathaway meeting on Saturday.
Before answering shareholders’ questions, company chairman Buffett specifically addressed those who aren’t necessarily invested in Berkshire Hathaway, but those who “have entered the stock market in the last year,” he said, as “I think there’ve been a record number that have entered the stock market.”
“I have [a few] very short lessons for perhaps the new investors,” Buffett said.
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Stock-picking is more difficult than it may seem
Buffett warned against investing in individual stocks, as “I do not think the average person can pick stocks,” he said.
“I would like particularly new entrants to the stock market to ponder just a bit before they try and do 30 or 40 trades a day in order to profit from what looks like a very easy game,” Buffett said.
To illustrate the difficulty of achieving success when stock-picking, Buffett first shared a list of 20 stocks with the largest market capitalization as of March – which included Apple, Saudi Aramco, Microsoft, Amazon, Alphabet and Facebook.
He asked the audience which of those stocks they predict would remain in 30 years.
Buffett then shared the top 20 companies by market cap in 1989; it included Japanese firms, Exxon, GE, Merck and IBM.
None of those remain in the top 20 today.
“I would guess that very few of you would have said zero, and I don’t think it will be, but it’s a reminder of what extraordinary things can happen,” Buffett said. “We were just as sure of ourselves, and Wall Street was, in 1989 as we are today. But the world can change in very, very dramatic ways.”
After all, ”[there’s] a lot more to picking stocks than figuring out what’s going to be a wonderful industry in the future.”
There’s a ‘great argument for index funds’
Instead of stock picking, Buffett suggested investing in a low-cost index fund. “I recommend the S&P 500 index fund,” Buffett said, which holds 500 of the largest companies in the U.S., “and have for a long, long time to people.”
To drive home his point, Buffett shared a slide that highlighted the large number of automobile companies in the early 1900s. ”[T]here were at least 2,000 companies that entered the auto business because it clearly had this incredible future,” he said. “And in 2009, there were three left, two of which went bankrupt.”
“It’s a great argument for index funds,” Buffett said. “If you just had a diversified group of equities, U.S. equities, that would be my preference, but to hold over a 30 year period.”
Buffett said it’s the reason he has instructed the trustee in charge of his estate to invest 90% of his money into the S&P 500, and 10% in treasury bills, for his wife after he dies. “I just think that the best thing to do is buy 90% in S&P 500 index fund.”
Don’t treat the stock market like a casino
In the past year, Buffett says there was “the greatest increase in the number of gamblers” dabbling in the stock market.
″[T]here’s nothing wrong with gambling and they got better odds than they’ve got if they play the state lottery, but … they actually don’t have a lot of good results,” he said.
For example, Buffett expressed concern with trading app Robinhood.
“It’s become a very significant part of the casino group that has joined into the stock market in the last year and a half,” he said. “There’s nothing illegal about it. There’s nothing immoral. But I don’t think you would build a society around people doing it.”
Robinhood responded to Buffett’s comments on Monday and disagreed with his sentiment.
“Retail investing in America is thriving today because everyday investors are seizing the opportunity to build their own nest egg,” the company posted on their blog. “Robinhood has made investing simpler and more accessible to more people…”
Nonetheless, “American corporations have turned out to be a wonderful place for people to put their money and save, but they also make terrific gambling chips,” Buffett said.
- Warren Buffett just sounded the alarm on inflation — here are 8 ways to be ready – Yahoo
To worry, or not to worry. That is the question — at least as far as inflation is concerned.
After running at an annual rate of 1.4% in January and 1.7% in February, inflation spiked to 2.6% in March, leading some experts, including the Oracle of Omaha himself, to ring the alarm on surging prices.
“We are seeing substantial inflation,” Warren Buffett told attendees at last week’s annual Berkshire Hathaway shareholder meeting. “We are raising prices. People are raising prices to us, and it’s being accepted.”
Ordinary Americans are searching for “inflation” online more frequently now than they have in more than a decade, data from Deutsche Bank strategist Jim Reid shows.
Here are eight strategies that can help you worry less about the impact of inflation on your finances — or even help you come out ahead — if inflation takes off.
1. Increase your earning power
When inflation occurs, you can think of it in two basic ways: one is that prices are increasing; another is that the U.S. dollar is losing value. Either way you look at it, earning more money is a pretty safe solution.
If you’re currently out of work or are having to deal with reduced hours, consider using whatever extra time you have at your disposal to develop your skill set and position yourself for a bigger paycheck.
You can use those skills to start a freelance side hustle or check out the latest job postings if you think it’s time for a job change with a larger salary and more opportunities to advance.
2. Play the stock market
Stocks have historically outperformed inflation to a significant degree, making them one of the strongest hedges against it.
You can use inflation to your advantage by investing in sectors of the economy that may benefit from rising prices, like food, tech, building materials or energy. Publicly-traded corporations like consumer product giant Procter & Gamble, burger chain Shake Shack and medical supply manufacturer McKesson have all either raised prices or are planning increases for later this year.
There are a number of innovative apps that can help you invest in the market. Weigh the pros and cons of each one, find the right one for your financial needs and get in the game.
3. Get precious
Fears of inflation have always been good to hard assets like gold and silver. Both commodities have performed well over the past five years, with the value of gold rising by 44% over that span and silver’s increasing by an even healthier 54%.
You can hold precious metals directly by purchasing coins or bars, or you can take a more hands-off approach and invest in ETFs that hold actual gold and silver. There’s a very popular app that can help you do that.
4. Capitalize on the scorching real estate market
Real estate has proven to be one of the most reliable long-term investment plays you can make.
The U.S. housing market has been on a serious upward trajectory since about the fourth quarter of 2011, when the median sale price was just over $221,000. At the end of Q1 2021, it had risen to $347,500.
If you’ve got the funds available for a home purchase, start comparing mortgage rates today and score yourself the best rate possible. The lowest mortgage rates tend to go to the borrowers with the highest credit scores, so do what you can to bring it up a few notches.
If buying a home is out of your budget, you can invest in real estatewithout buying property of your own by putting your money into a real estate investment trust, or REIT.
5. Adjustable rates are not your friend
When inflation rises, so do interest rates. If you’re carrying any adjustable rate debt, like a credit card balance or home equity line of credit, an uptick in inflation will result in higher interest charges.
That is especially true for mortgages, too. If you have an adjustable rate mortgage, you may want to talk to your lender about refinancing and opting for a fixed rate instead. That’ll guarantee that you’ll pay the same interest rate until you decide to sell your home — or refinance it again at an even lower rate.
6. Bring down your debt
If you’re carrying a significant amount of debt, but a mortgage refi or rate swap aren’t suitable for you, there are still options available for reducing the amount of interest you’re paying your creditors.
One proven method for slashing the cost of your debt is to take out a lower-interest debt consolidation loan. By rolling all of your high-interest debt into a single loan it’ll be much easier to budget around a single payment to one lender rather than several.
7. Cut all the remaining costs you can
You probably noticed by now that most of the suggestions here involve spending money. But cutting back on expenses is also an excellent hedge against rising inflation.
You may be paying more than you need to for your insurance products, so do some comparison shopping. You may find a better deal on your car insurance or save hundreds of dollars by comparing rates on homeowners insurance.
And don’t turn up your nose at coupon clipping, even Buffett does it.
8. Stay the course
Not everyone believes inflation’s recent spike is a sign of things to come.
Buffett himself said that inflation doesn’t appear to be preventing many Americans from spending.
“People have money in their pocket and they pay the higher prices,” he told his Berkshire Hathaway devotees at the May 1 meeting.
So if you’re comfortable enough with your current finances to absorb the higher prices — and maybe even have some “spare change” kicking around to invest with — you may want to ignore the hype and keep doing what you’re doing.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 255.9 million answers views on Quora.com and a widely sold book on Amazon
Further Reading
In the article below I spoke about a range of topics including:
- Is it safe to keep your entire savings invested in the stock market? Most people would assume no, but I explain when it is safe to do so.
- If time is money does money make time? I explain how having wealth can increase your lifespan, or at least give you a better chance of living longer.
- Does it make sense to sell your Chinese stocks if you currently own them? Or does it depend on the circumstances?
- How should you prepare for a stock market crash? Or is it a mistake to even try considering because nobody can predict the direction of the stock market?
- Can you really sell 4% of your investment portfolio every year and not run out of money, or even reduce your wealth over time? I look at some of the nuances of the so-called 4% rule of retirement.
- Is life all about money? Money does extend lifespans, gives one more choices and allows you to have more time if you wish, but it is everything? I explain why it isn’t and balance is key. In particular, I speak about the importance of things like time, experience, friendships and family.
To read more click on the link below
