As the market crumbles, here are 7 areas of well-worn Warren Buffett wisdoms to help you stay afloat
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While lessons of youth sometimes have to be learned the hard way, there are words of wisdom we can take from our elders. And for investors globally right now the one stalwart we could all do with sitting down and having a cuppa with is none other than 91-year-old Warren Buffett, the Oracle of Omaha.
From Omaha, Nebraska, Buffett earned the nickname as one of the world’s most successful and closely followed investors. He has amassed a fortune of more than US$110 billion after developing an interest in business and investing in his youth.
After graduating from his uni studies Buffett moulded his investment philosophy around the concept of value investing which involves buying stocks that are underpriced through a form of fundamental analysis pioneered by economist and investor Benjamin Graham.
He established Buffett Partnership Ltd in 1956 with the firm later acquiring a textile manufacturing business called Berkshire Hathaway. Buffett Partnership took on the Berkshire Hathaway name and it became a diversified holding company.
Among industries the company’s subsidiaries are involved are insurance, freight rail transportation, energy generation and distribution, manufacturing and retail.
Buffett has been Berkshire Hathaway’s largest shareholder and chairman since 1970. In 1978, another investor, Charlie Munger, joined Buffett as vice-chairman. Now also a closely followed billionaire investor Buffett has described Munger, 98, as his “closest partner and right-hand man”.
Berkshire Hathaway’s portfolio is often replicated by retail investors and it has outperformed another famous investor Cathie Wood’s flagship Ark Innovation ETF since the start of 2020, showcasing the rotation from high growth tech stocks to safer value investing.
With global markets entering correction territory and the bears out in force, many would pay good money to be a fly on the wall as Buffett and Munger discuss yet another market downturn in their long investing careers.
Tonight, in fact, we’ll learn who won the last chance to have a Million-Dollar Annual Charity Lunch with the man himself. The record price for it was paid in 2019 when Chinese crypto founder Justin Sun stumped up $US4.6 million for prime rib and a chat with Buffett at New York’s Smith & Wollensky.
Buffett himself would never have paid such a sum. He is known for his frugality, and has lived in the same house since 1958. Bill Gates tells the story of when they travelled together to Hong Kong and he offered to buy him lunch at McDonald’s. He quotes that Buffett put his hand in his pocket and pulled out coupons.
To this day, he still picks up breakfast at the golden arches on his five minute drive to the office. He eats a cheaper McMuffin when the market is down and splurges a bit more when the market is up, which he certainly wouldn’t have been doing much of lately.
Well known for his quotes on equity markets, Buffett writes an annual letter to shareholders which have become a required read and studied by investors the world over. His letters are available on the Berkshire Hathaway website and along with his rare media interviews or conference appearances provide for insightful, wise and frequently funny quotes on a range of topics affecting equity markets.
We’ve collated some of our favourite Warren Buffett wisdoms to help calm the nerves during these volatile times. They make for particularly good reading if your hand is hovering over the Sell button.
Buffett thinks of down markets as an opportunity to buy good companies at reasonable prices. One of his most famous quotes is:
His other quotes on market sell-offs include:
Buffett makes it clear that no one has a crystal ball to tell just when there will be a market downturn.
When it comes to controlling that woozy feeling in the pit of your stomach during a market downturn Buffet’s advice is to master your emotions.
When it comes to looking for quality stocks during market downturns Buffett has a plethora of quotes including:
Buffett is definitely a fan of long-term investing, with Berkshire Hathaway having held companies for many years and infrequently selling out positions. There are many classic Warren Buffett quotes on the topic – the first is one for the ages.
When it comes to buying stocks, quality trumps quantity for Buffett, who believes you should do your homework to gain a thorough understanding of a company.
Buffett doesn’t follow the herd and he’s often compared to others taking a different approach like Cathie Wood, which doesn’t phase the nonagenarian.
Buffett has amassed enormous experience on investing throughout his long career and life. He has seen great highs and lows. While as the American writer Mark Twain said: “History doesn’t repeat itself, but it often rhymes.”
Reassuringly, my studies in finance and economics have taught me about cycles and while you can’t put an old head on young shoulders we can learn from the past to understand that downturns in markets while stressful, will pass in time.
And for those wanting even a little more reassurance on the market downturn, we’ve got more thoughts and quotes from a behavioural finance expert, leaders in the Australian finance sector plus a yoga instructor.