Last week, legendary investor Warren Buffett, appeared on CNBC. Becky Quick, a reporter with CNBC, stated that the one question everyone asks when she meets with Buffet is, “What does he think about the stock market right now?” Buffet’s reply was priceless. I admire his candidness and humility. Buffet stated, “Well, I don’t have the faintest idea what the stock market’s going to do tomorrow or next week or next month or even next year. I do know that over time – and we’ll talk ten years or something of the sort – that equities will do better….”
Buffet also gave us a couple of pearls of wisdom in regards to risk, stocks and investor behavior. “If you’re going to need some money for college or something in a year, you don’t want to be in stocks because you don’t have any idea what stocks are going to sell for in a year. It’s inappropriate. Stocks are safe for the long run but they are very unsafe for tomorrow. If you call unsafe being will you be bothered by a decline in market prices. But Berkshire, three times since I took over, has gone down roughly 50 percent. Did I feel poor then? No, not at all…. I knew it was going to be worth more over time. American business is going to be worth more over time. You know, that’s what you’re buying, is a business. You’re not buying a stock, you’re buying a piece of a whole bunch of businesses. Are those businesses going to be worth more ten or 20 or 30 years from now? Of course, they are. But if you think you can jump in and out or that you know the time to come in, then I think you’re making a mistake.”
Too many investors want short term predictions, or allow fear or greed to impact investment decisions. Time is an investor’s best friend when it comes to risky assets like stocks. Market timing does not work. Following a long-term plan does. Listen to Uncle Warren.
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