At Berkshire Hathaway’s annual shareholder meeting on Saturday, Warren Buffett reiterated his long-term optimism and urged investors to maintain their focus in spite of the short-term market noise.
Warren Buffett confident that “the long-term trend is up”
“The long-term trend is up,” said Buffett, Berkshire’s chairman and CEO. “Nobody knows what the market will do tomorrow, next week, or next month. But people spend all their time talking about it because it’s easy. It just doesn’t have any value.”
Buffett responded to inquiries regarding Berkshire’s expanding cash reserves, which increased to $347 billion during the first quarter. He stressed that patience is preferable to making foolish investments, even though he would rather not keep a lot of cash on hand. “We’d rather operate under conditions that allow us to hold maybe $50 billion,” Buffett said. “But that’s not how business works.” He rejected the notion of making a down payment purely for the sake of making one, referring to it as “the dumbest thing in the world.” Buffett instead plans to just stay patient until better investment opportunities come up. “We’ve made a lot of money by not being fully invested at all times,” Buffett says. “We keep dry powder ready for the moments when we’re bombarded with attractive offerings.”
Buffett admitted that not everyone would benefit from his strategy. Although Berkshire actively chooses stocks and buys businesses, he has long counseled regular investors to stick to straightforward, passive investing methods. “For passive investors, a few simple investments held over a lifetime is a sound strategy,” he said. “But we’ve chosen this business, and we believe we can do a little better.” When asked about the recent market swings and fluctuations, Buffett didn’t seem to be bothered. “What’s happened in the last 30, 45, or even 100 days is really nothing,” he said. “This hasn’t been a dramatic bear market.”
Short term loss does not necessarily mean long term loss
Buffett also claims that the short term fluctuation and losses should not shake investors too much. “If it matters to you whether your stocks are down 15%, you need a different investment philosophy,” Buffett said. “The world won’t adapt to you — you must adapt to the world.” Buffett did not, however, disregard the possibility of significant market declines in the future. According to his prediction, investors will probably experience a “hair curler” event in the next 20 years, which would be a significant disruption.
“The world makes big mistakes, and surprises can come from unexpected places,” he said. “The more complex the system, the more dramatic the surprises.” To finish things up, Buffett encouraged investors to be emotionally grounded. “Markets go up and down. If you get scared when they fall or excited when they rise, investing may not be for you,” Buffett said. “You have to check your emotions at the door.”
Featured Image Credit: Anna Nekrashevich; Pexels: Thank You!
