Warren Buffett Explains Why Some People Shouldn’t Bother Investing In Stocks — ‘If You’re Gonna Do Dumb Things Because Your Stock Goes Down, You Shouldn’t Own The Stock At All’
World-famous investor and Berkshire Hathaway Inc. CEO Warren Buffett has earned a reputation for his immense success in the world of finance. He is known for his straightforward and practical approach to investing, which has made him a trusted source of financial wisdom for millions.
In a 2018 CNBC interview, Buffett shared insights on interest rates, stocks and investor behavior, and his advice remains relevant in today’s challenging economic climate marked by inflation and rising interest rates.
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Buffett began his investing career at a young age and dedicated himself to becoming proficient in the craft. This early commitment laid the foundation for his eventual ascension to the pinnacle of financial expertise. Among the various topics he covered in the interview was the delicate balance between interest rates and stock market returns. He cited an example from the early 1980s when long-term government bonds soared to an unprecedented 15% interest rate. Businesses that could generate a 15% return on equity suddenly became lucrative investment opportunities as they surpassed the high-yielding bonds.
But numbers are only part of the equation; Buffett also emphasizes the human element in investing. As he stated in his interview, “Some people should not own stocks at all because they just get too upset with price fluctuations. If you’re gonna do dumb things because your stock goes down, you shouldn’t own the stock at all.”
This advice shows that emotional resilience is as crucial as financial acumen when it comes to successful investing. Buffett advises that potential investors should educate themselves and treat their investments as long-term business partnerships to better weather the market’s ups and downs.
Buffett challenges the age-old belief that a balanced portfolio should include a fixed percentage of stocks and bonds. He contends that if someone is emotionally unable to deal with stock market fluctuations, perhaps they shouldn’t be in stocks at all, no matter what conventional wisdom or financial advisers might suggest.
It’s reasonable to explore alternative assets like art, which has a track record of consistently outpacing the S&P 500. Masterworks is a platform that enables people to broaden their investment portfolios by acquiring high-quality art pieces, democratizing an asset class that was once exclusive to the wealthy.
The art market typically doesn’t suffer from the same drastic fluctuations that stocks do, providing a safer, yet profitable, investment option. Art also adds a tangible, aesthetic value to your portfolio, something stocks cannot offer.
For many, the stock market’s ups and downs can be a source of emotional stress. Despite best intentions and logical reasoning, some people find it difficult to hold their ground when their stocks experience a downturn. Instead, they may act out of panic, selling off assets in a reactionary move that often results in long-term losses. No matter how much people may try to convince themselves to stay the course, they find that they’re not cut out for the long-term commitment and emotional roller coaster that stock market investing entails.
Buffett’s enduring principles resonate in any financial climate, teaching investors that long-term thinking, emotional stability and a comprehensive understanding of investment choices are key to financial success. Whether you’re inclined toward traditional stocks or alternative investments like art, his insights are an invaluable resource for navigating today’s complex financial landscape.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
