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Blog | Recent words of wisdom from Warren Buffet

Glenn Fairbairn
Director/Private Client Adviser
11 May 2020

Each year in early May Warren Buffett, who many argue is the most successful investor of all time, hosts the shareholder meeting for his company Berkshire Hathaway.  Here are my favourite insights from this year’s virtual shareholder meeting.

In a normal year, about 40,000 people flock to the annual meeting in Omaha, dubbed “Woodstock for Capitalists,” to hear Buffett’s words of wisdom. This year though, due to the global COVID-19 pandemic, the meeting was hosted solely online.  

As always there were many key takeaways for novice and even seasoned investors. I am pleased to share some of my favourite comments: 

Buffett explained that he has enjoyed a tailwind for nearly his whole career. 

All investors would have had to do when he was starting out to earn 100 times their money was to buy what he termed “a cross-section of America” in the form of broadly diversified stocks, then do nothing. 

“You didn’t have to read the Wall Street Journal,” he said. “You didn’t have to look up the price of your stock. You didn’t have to pay a lot of money in fees to anybody. You just had to believe that the American miracle was intact.” 

Even the worlds best investors make mistakes. 

Buffett discussed the sale of Berkshire’s holdings in the four biggest U.S. airlines — American, Delta, Southwest and United. “I just decided I’d made a mistake,” he said. Buffett pointed out, if the demand returns to 70% or 80% of its pre-pandemic normal, the industry will still have far too many planes. 

He is reluctant to talk about COVID-19 but is optimistic the US will recover. 

Drawing some comparisons to the Spanish flu of 1918-19, Buffett said he doesn’t “know a parallel” in terms of “a huge population…sidelining its economy and its workforce…and obviously and unavoidably creating a huge amount of anxiety.” However, Buffett said: “I remain convinced that nothing can basically stop America. “The American miracle, the American magic, has always prevailed, and it will do so again.” 

Invest for the long term. 

Buffet recommended that investors need to stay in stocks over a long period of time since they will continue to be a better bet than bonds. “America’s tailwind is not exhausted. Perhaps with a bias, I don’t believe anyone knows what the market is going to do tomorrow, next week, next month, next year. I know America’s going to move forward over time, but I don’t know for sure and we learned this on Sept. 10, 2001. And we learned it a few months ago in terms of the virus. Anything can happen in terms of markets. And you can bet on America but you’re going to have to be careful about how you bet. Simply because markets can do anything.” 

Most governments and reserve banks are doing the right thing with Stimulus. 

Buffett conceded that these drastic moves could lead to problems in future but that the Fed had no alternative. “We do know the consequences of doing nothing,” Buffett said, adding that the Fed’s actions are the equivalent of “whatever it takes, squared.” 

At Hewison Private Wealth we have always followed Warren Buffett closely and his comments are a helpful reminder that no one knows what is around the corner and you should always invest with a long-term investment horizon. If you can’t handle the short term volatility the market can inflict on you then it’s probably fair to say you shouldn’t have invested in shares to begin with. 

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.