Buffett to first-time investors: ‘It is not as easy as it sounds’
Buffett, who kicked off the much-awaited annual general meeting of Berkshire Hathaway alongside Charlie Munger, had a very simple advice for first-time advisers: “It’s not as easy as it sounds”.
Buffett’s advice comes in the backdrop of a roaring bull market in global equities that has made trillions of dollars of notional wealth for investors despite a raging pandemic across the world.
The veteran investor demonstrated how difficult it is to be an investor in the equity market by comparing the world’s top 20 most valued companies three decades apart. “None of the top 20 highest valued companies from 1989 are in the same list 30 years later. It is a reminder of what extraordinary things can happen,” Buffett said.
His value investing style, inspired by Benjamin Graham, has made him one of the richest men in the world with net worth nearing a $100 billion. So when Buffett speaks, the global investing community listens.
Buffett said that before investors become too sure of themselves, it is important to realize that “there is a lot more to picking stocks than to work out which is going to be the most wonderful industry in the future”.
“Best ideas in 1989 did not necessarily do well, although equities overall was the place to be,” Buffett said.
The nonagenarian, however, lamented the increase in investors with a strong gambling impulse over the last year, likely pointing towards the hordes of first-time investors who have joined the stock market through online trading apps like Robinhood.
“It creates its own reality for a while but nobody tells you when the clock strikes 12,” Buffett said. The value investor lambasted Robinhood’s role in enabling the rise of casino-like trading in the US stock market and said he would not want more of it.
Buffett reiterated his advice from yesteryears that an average investor should invest in index funds or hold the market through exchange-traded funds instead of betting on the trending sector or stock. “I do not think the average person can pick stocks,” Buffett said.
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