Warren Buffett Wisdom to Help You Retire Early
Warren Buffett is not only the greatest investor of our generation; he is a wonderful teacher with a wealth of investment knowledge to share with his disciples. If you’re a newbie investor looking to dip a toe into the stock markets, it may pay off to listen to Warren Buffett’s words of wisdom from the past. When he speaks, he can pay even bigger dividends from being listening. And whenever he acts, he can leave top-down clues about the best value opportunities at any given time.
While it’s never a good idea to blindly follow a guru like Warren Buffett into or out of a stock (you’ll be stunned with a Buffett bounty if you try to follow him into his last bets), trying to put yourself in its place can help you tip the risk / reward in your favor.
Take Warren Buffett’s moves in 2020. He was quite careful. Probably more cautious than he would have liked in the depths of March and April after the stock market finished collapsing like a paper bag. Of course, the hindsight is 20/20.
Playing it safe in a year plagued by a pandemic
Instead of backing up the truck with Berkshire Hathaway Cash, as Bill Ackman, another billionaire investor thought, Warren Buffett made some selling and some modest bets in some fairly defensive areas of the market. Think of the grocers and the best gold miners Barrick Gold. More recently, the Oracle of Omaha has bet on Japanese sogo shosha companies “Steady Eddie” and a wide range of healthcare companies, both low cost and quite defensive in nature.
Warren Buffett’s cautious optimism raised the question: are we ready for a devastating stock market crash, such as we may not have seen since the 2008-09 crash?
While it may still be too early to conclude that the man was wrong not to save the truck on inventory in 2020, I think the skeptics are a little too hard on the man, especially more that Berkshire Hathaway was quite vulnerable to a pandemic. 2020. The company 100% owned many businesses that were essentially at zero point of the crisis, making it difficult to pivot and avoid damage from the insidious coronavirus. Can we blame Warren Buffett for being cautious, given that the risks of COVID were not as balanced as he would have liked in early 2020? Probably not.
What’s up with Warren Buffett’s cautious tone?
From 2021, I think Warren Buffett will likely continue his cautiously optimistic approach to investing. He is not the only one to time the markets. But he’s also the type to dampen his optimism when he thinks we’re in the late stages of a market cycle, where long-term risks can outweigh potential rewards.
In the beautiful book by Howard Marks Master the market cycle, the man explains in detail how investors can tip the scales in their favor depending on their position in the market cycle. It’s not easy to know which round we are in right now, but if Warren Buffett’s moves are any suggestion, we may be in the final rounds and the coronavirus crisis can be a deep bump in the road, rather than a complete reset of the market cycle. .
Either way, I think investors shouldn’t take Warren Buffett’s recent defensive moves lightly. If Berkshire were to start buying Barrick Gold shares again, I think investors would be wise to gain exposure to precious metals as well, even though Buffett has criticized the metal in the past.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool service or advisor. We are Motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we’re posting sometimes articles that may not meet recommendations, rankings or other content. .
Silly contributor Joey frenette owns Berkshire Hathaway shares (B shares). The Motley Fool owns shares and recommends Berkshire Hathaway (B shares) and recommends the following options: $ 200 short put options in January 2021 on Berkshire Hathaway (B shares) and $ 200 long calls in January 2021 on Berkshire Hathaway (B shares).