“Stocks [have] been so much more attractive than bonds for a long time now.”Warren Buffet – Squawk Box 2017
At 88, Warren Buffett’s white hair, bushy eyebrows and aw-shucks grin hardly make for an intimidating appearance. But he is one of the most powerful investors in the world, thanks to his Midas Touch on Wall Street.
Buffett is worth $82.5 billion, according to Forbes, making him the third richest person alive (behind Amazon founder Jeff Bezos and his friend and Microsoft co-founder, Bill Gates).
Here are five of his best bits of investing wisdom on how he does it.
1. Investing is a long game
“Now if they think they can play[dance] in and out [of the market] and buy and sell stocks, they ought to head for Las Vegas. I mean, they can’t do that,” Buffett told “Squawk Box” October 2014. “But what they can do is determinate that there’s a number of solid American businesses, a great number of them, and if you own a cross section of them and particularly if you buy them over time, you basically can’t lose.”
Investing is a long game, he says.
”I will say that in 10 or 20 or 30 years, I think stocks will be a lot higher than they are now. ”
Buffett has also likened buying stocks to owning more physical assets. “If you own stocks like you’d own a farm or apartment house, you don’t get a quote on those every day or every week,” Buffett told “Squawk Box.”
To protect your money, buy stocks in several different kinds of firms and spread your purchases out over time.
“The best thing with stocks, actually, is to buy them consistently over time,” Buffett told “Squawk Box” in February 2017. “You want to spread the risk as far as the specific companies you’re in by owning a diversified group, and you diversify over time by buying this month, next month, the year after, the year after, the year after.”
3. Stocks are better than bonds
“If you save money, you can buy bonds, you can buy a farm, you can buy an apartment/house — or you can buy a part of an American business,” Buffett said in February. “And if you buy a 10-year bond now, you’re paying over 40 times earnings for something whose earnings can’t grow. You compare that to buying equities, good businesses, I don’t think there’s any comparison.”
Clearly, even as Buffett himself has said, anything can happen in markets. If bond interest rates overtake stock market returns, then this advice no longer holds. “But I would say this: If the 10-year stays at 2.30 [percent interest rate] and it would stay there for 10 years, you would regret very much not having bought stocks now,” Buffett said in February.
“The one thing I’m sure of is that overtime, stocks from this level will beat bonds from this level,” Buffett told “Squawk Box” October 2017. “Stocks [have] been so much more attractive than bonds for a long time now.”
4. You can’t time the market
“You’re making a terrible mistake if you stay out of a game that you think is going to be very good over time because you think you can pick a better time to enter it,” he told “Squawk Box” in February 2017.
5. There’s no room to be emotional
“Some people should not own stocks at all because they just get too upset with price fluctuations. If you’re gonna do dumb things because your stock goes down, you shouldn’t own a stock at all,” said Buffett told “Squawk Box” in February 2018.
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