September 17, 2021

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Warren Buffett in a bull market: Don't follow the investor flock

Warren Buffett in a bull market: Don’t follow the investor flock

Buffett is an amazing businessman. He expanded his business, Berkshire Hathaway, and turned a failed textile factory into an international conglomerate. The net worth of the investor is estimated to be more than $100 billion.

Most people start to care about stocks when everyone else is interested. However, the time to buy is when almost no one cares. You can’t buy something famous and it’s good to get out of it, Warren Buffett commented on the current situation.

The billionaire asserts that the shares of some “modern” companies have failed miserably in recent years. Following the blind crowd often leads to disastrous results. Instead of focusing on what’s popular, try to prioritize security and stability, he advises investors. He states that the easiest way to prepare for market surprises is proper diversification – spreading the investments as wide as possible.

Buffett is a well-known proponent of index funds and believes that the best thing most investors in the US market can do is put their money into a fund linked to the S&P500 index. He also recommends working with professional financial advisors. Then there is the possibility that the built wallet will be able to withstand another “natural disaster” such as a pandemic. The Oracle of Omaha advises never to invest borrowed money, because “in the investing world, pressure is the worst advisor to buy or sell, and pressure is always there when we trade our capital.”

Warren Buffett once said, Be it socks or stocks, I like to buy quality items when they are on sale, thus making clear his preferred course of action, he is determined to find good deals. Although she has a large capital, she is not in a hurry to invest. He remains patient and only relies on reliable companies when they are available at low prices.

He recommends his followers to create a watch list of stable companies with reputable brands that they want to invest in and then wait for the opportunity. No matter how much talent and effort there is, some things take time. You can’t have a baby in one month by conceiving with nine women, the investor sarcastically said.

Buffett cautions that anyone who invests long enough will find that there will be weeks, months, and even years when the portfolio will only pay out losses. “But a real investor welcomes a hugely changing market because there comes a time when stocks of very good companies are unreasonably low in price,” the billionaire said, noting the investment to roll around.

The “Oracle of Omaha” reminds us that the people who bought stock during the worst of the pandemic made huge profits and those who sold the stock at that time were wrong. It is important to understand that volatility is the rule, not the exception, in stock markets and that periods of recession and long volatility can benefit investors.

According to Warren Buffett, dividends are the key to long-term growth. The billionaire loves companies that share profits. His company, Berkshire Hathaway, receives hundreds of millions of dollars in profits from Coca-Cola each year. Other high-paying companies include Caterpillar, AT&T, Verizon and investment firm BlackRock Capital.

When deciding to invest in a particular company, focus on its future, not its history. Tracking past trends is much less important than identifying new opportunities. Adopting a herd mentality is a surefire way to get modest results, Buffett advises investors.

The billionaire says inflation is a “capital tax” that discourages companies from investing. “Inflation acts like a giant tapeworm for companies that eat their daily ration early without worrying about the health of their host,” Buffett comments. It adds up regardless. The size of the company’s profits, the entrepreneur has to spend more on receivables, inventories and fixed assets to match the unit size in the previous year.

In the face of steadily increasing inflation, which has reached an unprecedented level in the United States for several years, investors should consider assets that are resistant or at least less susceptible to the effects of rising costs. Warren Buffett recalls that the assets that have historically performed well in periods of high inflation are gold and real estate. He also mentions the farmland that another billionaire Bill Gates has recently invested in. Agriculture offers stable and reliable profits. Buffett notes that no matter what the state of the economy is, people still have to eat.

The billionaire has never hidden a great distance in front of cryptocurrencies. His longtime business partner, Charlie Munger, even talked about the digital currency as being “useful for kidnappers and extortionists.”

Buffett has emphasized more than once that he doesn’t invest in things he doesn’t understand. I realize this may change someday. There was a time when it refused to invest in Apple, which today is one of the biggest packages in Berkshire Hathaway, recently recalling the billionaire from Omaha, Nevada.

If you are intent on buying bitcoin, make sure that you only invest as much as you can afford to lose. Buffett concluded that if you have a well-balanced portfolio of traditional investments, you will be able to enjoy the excitement of participating in the cryptocurrency trend while maintaining a moderate level of risk overall.

The Oracle of Omaha lives frugally. He drives a car not from his early youth and still lives in the house he bought several decades ago. He eats breakfast at McDonald’s almost every day and uses his free meal card.

Warren Buffett recently said, “If I had the opportunity to give away a significant portion of my fortune for a few extra years of my life or for the opportunity to do what I love, I would do it in a second.”

Jacek Brzeski

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