The stock market has fallen a lot this week-how will Warren Buffett react?
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Editor’s note: The volatility of the US stock market caused by the epidemic has directly narrowed the gap between many people and Buffett. After all, the “stock god” has only seen one more US stock market meltdown than we have now. But as an elder in the stock market, Buffett naturally has a life experience worth learning from. Market volatility is a good opportunity for us to bargain-hunting. Having a long-term perspective is an essential quality for a good investor. “Others fear me greed, others greedy me fear” is also a proverb that needs to be kept in mind. This article is translated from medium, author Jeremiah Lam, original title 3 Warren Buffett Principles to Remember in a Volatile Stock Market.
The 11-year bull market in the stock market has finally ended in the past few weeks, mainly because people are worried about the outbreak of the virus and the ensuing economic recession. Moreover, there is no reason to believe that the volatility of the stock market will soon subside.
The share prices of the leaders of global listed companies have begun to decline. However, rather than panic, it is better to take a step back and evaluate the situation from the perspective of a rational, long-term investor. The CEO of Berkshire Hathaway, Warren Buffett, is the most rational long-term investor worth learning from.
In all the pessimism, we may first carefully consider the three principles used by this “Oracle of Omaha” in a turbulent market. In the future, you can also use it as your own investment strategy. use.
Long-term vision
In October 2008, at the height of the financial crisis, Warren Buffett published a column entitled “Buy American. I Am.” in The New York Times, explaining the focus Long-term necessity.
In the long run, the current decline in the stock market is also a good newsinterest. In the 20th century, the United States experienced two world wars and other military conflicts that caused trauma and high costs, as well as the Great Depression, more than a dozen economic recessions and financial panics, the oil crisis, the flu epidemic, and the reputation of a president who had been honoured resignation. However, the Dow Jones Index rose from 66 points to 11,497 points.
Now, people are worried that the Covid-19 pandemic will slow down the world economy. Many people have predicted that we may face a depression, not just a recession.
Although this may cause the stock market to continue to languish before the recovery, we should remember that this is nothing new and we have experienced several stock market crashes before.
So, all this will pass. It’s just a matter of time. Once the storm is over, the stock market will continue to rise, and history has proven this.
When the stock price falls, you should be happy
In the long run, the stock market is performing well, so when the stock market is lower and the stock price is lower, it is a good opportunity for you to invest.
The following is an excerpt from Buffett ’s 2011 letter to Berkshire Hathaway ’s shareholders:
“If you intend to become a net buyer of stocks in the future, whether it ’s using your own money directly or indirectly (through a company you own that is buying back stocks), you should of course want you to be at the price Buy when it falls. However, people ’s emotions often complicate the problem: most people, including those who will become net buyers in the future, are happy to see the stock price rise. These shareholders are like a cheer after the rise in oil prices Commuter just because he just filled the tank that morning. “
As investors, we must have a long-term investment vision-at least five years or more. If we do have a long-term view on stocks, why should we worry about a short-term market decline? Only when you are about to cash out your previous investment, you need to worry-for example, you plan to retire in the near future.
If you do not plan to retire in the near future, such a short-term decline will instead provide an opportunity for you to buy more outstanding corporate stocks at a very low price.
Great companies will thrive
Great companies often continue to have excellent performance because of things like innovation.
The following is what Buffett said in a 2016 letter to Berkshire Hathaway shareholders:
In the next few years, the value of American companies—and the resulting basket of stocks—will almost certainly be much higher. Innovation, increased productivity, entrepreneurship and sufficient capital will ensure this. People who often sing antiphony may succeed by selling their pessimistic predictions. butIf they do the nonsense they sell, then only the Lord can save them.
Of course, many companies will fall behind, and some will close down. This screening is the product of market dynamics. In addition, in the next few years, the stock market will occasionally fall sharply, or even panic, which will affect almost all stocks …
In such a terrible time, you should not forget two things: First, as an investor, the general panic is your friend, because it provides an opportunity to buy on dips. Second, personal panic is your enemy. Investors who avoid high and unnecessary costs and only choose conservative American companies, I can almost be sure that they have made a lot of money.
In this 2016 letter, Buffett also mentioned that every 10 years or so, the sky above the stock market will be covered with dark clouds and “a brief rain of gold”. When such heavy downpours occur, we should carry a large bathtub instead of a small teaspoon when we go out.
Therefore, during the current market crash, we should stay away from fear and take large-scale actions (provided that we have conducted appropriate research on these companies and set aside 3 to 6 months of emergency funds) to accumulate long-term wealth.
Written at the end
In summary, Buffett ’s attitude towards market volatility is: do n’t be afraid of volatility, hold some cash, and be good at taking advantage of the opportunity to take advantage of lower stock prices, although at this time, everyone seems to be selling stocks, and you need to know , Your chance is here.
Translator: Xitang