In the annual shareholder’s meeting for Berkshire Hathaway, one of the attendees asked the investment magnate, Warren Buffett, how he effectively times market movement. Investors know that it’s impossible to time the market. However, it seems like Buffett had made key decisions during the best times. How does he do this?
Back in 1969 and 1970, Warren Buffett decided to get out of the market. Then the market became cheap so Buffett returned to the market in 1972 and 1974. The same thing happened in 1987, 1999, and 2000.
Surprisingly, Buffett said that they had no idea what would happen in the stock market. He explained that neither he nor Charlie Munger, his right-hand man, talked about buying or selling based on what the market will do.
He added that back in 2008, everyone was down and the market was down. But they were optimistic and spent around $15 or $16 billion. At that moment, he had no idea whether it would be a good or bad time. If he had any sense of timing, he would have waited about six months.
Buffett also admitted that he missed the market timing in 2020. If he was good at timing then he wouldn’t have purchased stocks back in March 2020 when COVID-19 cases were starting to spread. During that period, many businesses and schools were closed, not to mention the economy had to shut down. Buffett said he missed the opportunity to load up on equities.
The billionaire investor said that they have never been good at timing. However, they’re good at determining what they were getting into for their money. They had no idea about what the market movement would be.
They would just hope that the market would be down so they could continue buying cheap stocks. Buffett has been known for conducting extensive research on companies as well as their performance. He would rather hold stocks for the long term rather than the short term. Basically, what he does is look for stocks that are sold cheaply relative to their true value.
Thanks for staying with me until the end. And as promised, here’s your bonus tip.
Buffett is a true value investor. If you’re into value investing, you should consider following his strategy. What Buffet does is pick out cheap stocks that have excellent overall potential as a business. He then holds the stocks in the long term. Buffet doesn’t focus on capital gains. Instead, he wants companies that are capable of generating earnings for a long time.
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Recommended books for further reading:
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- Stock Market Investing For Beginners: The Investment Guide – How to benefit from the crisis, invest in stocks and generate long-term passive income incl. ETF and Stock Picking Checklist
- Shares Made Simple: A beginner’s guide to the stock market
- Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Navigating the Stock Market, Growing Your Wealth & Creating a Secure Financial Future
- The Five Rules Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market
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