Warren Buffett’s Advice for this Pandemic
Warren Buffett’s Advice for this Pandemic
During this pandemic, there is much information floating around about what you should be doing regarding your investments. It is difficult to figure out exactly whom to listen to and what advice to take seriously. Warren Buffett is one of the most recognizable and successful investors in history. He has invested consistently over the past number of decades and successfully navigated many downturns. Buffet has previously said that stock market cycles have tended to repeat themselves over time and that is why, after an 11-year bull market, many experts were somewhat expecting this recent correction. It is worth taking a look at history and assess what worked, and what didn’t, when it comes to protecting your finances and being more informed to successfully navigate an economic downturn.
We have collected the best tips, tricks and advice from Warren Buffett, and we want to share them with you. These tips will, hopefully, help you decide the best way to move forward with your personal finances and investments.
Try not to check stock prices
Checking stock prices frequently can cause a lot of unnecessary panic. Buffett has stated that investors should think of the stock market as infrequently as possible. He also said that investors would be better off if the stock market was only open once a year to make trades and he prefers to say that he is buying businesses, rather than buying stocks. If you are investing in a certain business, by buying their stock and planning to hold for 3 – 5 years, then checking the stock price each day is a pointless exercise. If the price drops a few percentage points in a day, it will cause unnecessary panic. In addition, if it rises a few points in a day, it is not anything to get too excited about, as it will probably be quite irrelevant over the longer term.
Low-cost, index-linked funds are sensible for most investors
Many times, Warren Buffett has recommended index funds instead of individual stocks. This comes from the fact that index funds are usually cheaper overall than doing a number of individual trades, and an index fund is already diversified for you. Indices can be classified as more reliable than stocks because they are more secure. They don’t require active management, which costs more money, and you do not need to worry about timing the market or determining what risks are worth it.
Did you know that approximately 97% of fund managers don’t beat the market net of fees? This is very concerning if your portfolio is made up of separate stocks that are being handled by a manager.
Buffett has decided that after he passes away, 10% of his cash is to be put in short-term government bonds and 90% in a very low-cost S&P 500 linked index fund.
If that isn’t a glowing recommendation for index funds, then we are not sure what is!
Plan to hold your investments forever
When talking about stocks and investments, Warren Buffet is clear in his advice that if you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes. He highly recommends always buying and holding and this is great advice for everyone right now. While we have seen a downturn in the markets, some may be tempted to sell and rid themselves of the stress. Buffett would completely disagree. With his mentality, everyone would hold their investments until this passes and the market corrects itself. This will set you up to earn more compound interest and, possibly, even higher returns, as your stocks may increase in value over time and pay dividends periodically.
Be aware of fees
Right now is the perfect time to look into all of your investments and take note of the fees you are paying. These fees, even if they look low, could be continually cutting into your returns without you even noticing. Buffett calculated that the American pension funds have lost $100 billion over the last decade to fees alone.
This is extremely concerning. No one wants their hard-earned money wasted away on fees when it could be in your account making more money. Sit down and take a look at your finances. Calculate your fees and see where you can make some changes, if need be.
As discussed above, Buffett recommends a low-cost index fund for most investors. This is because the fund is not actively managed and usually does not carry a high fee with it.
The bottom line
This pandemic is an unnerving time for everyone as we have never experienced anything like this before. But it does hold a possibility of an upturn after this pandemic subsides. No one can determine what will happen in the future, but this is a great time to get your finances in order and see if any of Warren Buffett’s advice can help in any way. We want you to be the most knowledgeable you can when it comes to protecting your personal finances and investments, as that is most important to us at Retire on Time.
Subscribe to our free Blog
The best advice on retirement, investments and personal finance delivered right to your inbox.