Berkshire Hathaway held its first virtual Annual General Meeting as they couldn’t host it this year in Omaha due to coronavirus-led travel ban. CEO Warren Buffett virtually welcomed the shareholders and investors world over to what he calls as the Woodstock for Capitalists. The Oracle of Omaha shared his insight about the economy and stock market, and the impact of the coronavirus crisis. He shared some great advice on how and where to invest and also updated on his investments.
Growth is inevitable but be cautious
Buffet would gone on a buying spree during the market crash of 2008, but this time around he has for the most part, laid low. Even though his company sits on a $137 billion cash pile, they are in fact net seller of equities in 2020. Right now, his advice is to exercise caution unlike 2008 when he stated “Buy American. I am”.
He said “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 September 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,”.
Investment in equities pay off in the long run when done right.
Buffet was in favor of equities as he believed that in the long term, they outperform treasury bills. His advice was to treat equities as a partnership in the company and not as some gambling instrument. “It will outperform bonds, treasury bill and the money under the mattress over the long run unless you see them as gambling instruments,” he stated.
Learn from mistakes
Buffett admitted that he made a mistake in investing on airlines, the company owned 9-11 per cent stakes in airlines such as Delta Air Lines, American Airlines, Southwest Airlines and United Airlines. Buffet decided to sell them all in April. “I don’t know that three, four years from now people will fly as many passenger miles as they did last year,” he said.
“When we sell something, very often it’s going to be our entire stake. We don’t trim positions. When we change our mind, we don’t take half measures. And if we like a business, we’re going to buy as much of it as we can and keep it as long as we can,” he explained. Its best not to hold on to your investments if it had not gone according to plan, there is no reason to exiting your position and starting over.
Index investing could be the best approach
Its best to stick with index investing if you’re a layman investor, instead of making investments following suggestions from advisors. Buffet is of the opinion that the best thing is to investing the S&P 500 index fund.
In India, there are various index funds from Nifty50, Nifty Next 50, Nifty 500 to Nifty Midcap 150 index funds. You can also invest in S&P 500 index fund. India’s first international index fund was launched by Motilal Oswal AMC that exposes you to top 500 US companies.
Don’t invest on debt
Money is quite easy to come by these days, but its best not to use credit cards. “People should avoid using credit cards as a piggy bank to raid. It just doesn’t make sense. You can’t go through life borrowing money at those rates and be better off.”
