Investment advice and tips from Warren Buffet. Where to invest? | K&L Rock 1
K&L Rock Group / News / Investment advice and tips from Warren Buffet. Where to invest?

Investment advice and tips from Warren Buffet. Where to invest?

Published by: 30.06.2021 12:59:42

One of the ways many people become successful is to approach every crisis as an opportunity - to learn, to invest, to grow. Take billionaire Warren Buffett.

He once famously advised investors to "be afraid when others are greedy, and greedy when others are afraid." Not only has he emerged from the pandemic richer, his net worth surpassing the $100 billion mark in March even as he donated billions to charity, but he also comes with valuable advice for investors.

Even if you don't have the capital of the "Miracle of Omaha," these eight COVID-19 tips from Warren Buffett will help you to a more valuable fortune. 


1. Are you new to investing? Join the S&P 500

During his Berkshire Hathaway company's annual meeting last month, Buffett talked about his favorite investment - the one that prevailed during the COVID crisis.

"I recommend the S&P 500 index fund and hold it long", Buffett said, adding that after his death, 90% of the money he left to his wife will go into the S&P 500 fund.

*S&P 500 index funds are mutual funds or ETFs that mimic the well-known stock index that tracks the 500 largest U.S. companies. Despite the pandemic, the S&P 500 index rose 16% in 2020 and reached new highs in 2021.

"I like Berkshire, but I think a person who knows nothing about stocks and has no particular feelings about Berkshire, I think should buy the S&P 500 index," Buffett told a shareholder meeting in Los Angeles.

Be like Buffett: Investing in the S&P 500 through an ETF or mutual fund doesn't require a pile of cash. You can start building a diversified portfolio just by investing your "change."


2. Be practical - even when the market loses its mind

Although the stock market has made millionaires out of the many people who clicked on the right Reddit chat during the COVID lockdown, Buffett advised his investors to take a long-term and practical approach to the market rather than making "30 or 40 trades a day to profit from what looks like a very simple game. "
Note: more on Reddit and "MEME STOCKS" in our article HERE

During the meeting, Buffett displayed a pair of slides showing the 20 largest companies in the world by stock value today and in 1989. None of the companies on the 1989 list were on the 2021 version. Lesson: things change and picking winners is not easy.

"If you just had a diversified group of stocks, U.S. stocks, my preference would be to hold them for at least 30 years," he said.

Be like Buffett: Investors who make informed decisions were rewarded this year as the stock market marched to new record highs, even amid the chaos of COVID-19.


3. Don't count on pensions

One of the trends Buffett pounced on during the Berkshire meeting was the still-precarious state of many U.S. government pension funds, which he has been closely monitoring since 2013.

"The pension situation in many U.S. states is terrible," Buffett said.

The pandemic has been the nail in the coffin of the U.S. states' financial situation and will only exacerbate a pension problem that currently has no long-term solution. Even before the pandemic began, state pension plans were nearly $1 trillion short of the funding they would need to meet future obligations to retirees.

Be like Buffett: If you have a traditional pension plan, you may not be able to count on it to provide you with a pension.


4. Investors should be wary of certain investments

The coronavirus crisis devastated entire industries. Airlines survived with the help of government support. Take that support away and you'd be looking at a whole new kind of air disaster. This industry has several months before anything resembling business as usual - and normal profit margins - return.

"I still wouldn't want to buy an airline," Buffett told his Berkshire shareholders.

One of the carriers Berkshire dropped from its portfolio was Delta Air Lines, whose stock lost more than half its value between March 1 and May 15 of last year. That stock has since recovered, as have those of other major U.S. airlines, but Buffett has little confidence in the sector's economic fundamentals.


5. Stick to your long-term plan

Buffett remains confident that the U.S. economy will rebound from the COVID crisis, but he told his shareholders that the future is far from certain.

"You can bet on America, but you have to be careful how you bet," he said, later reiterating that the world could change "in a very, very dramatic way."

Buffett has never backed down from his belief that holding stocks for the long term is the right investment play for a stable financial future. During the Berkshire meeting, he was even reminded that he once said holding onto stocks forever was "too short a time period."


6. Take full advantage of low interest rates

Buffett sees fantastic opportunities in 2021, thanks to the Federal Reserve's commitment to keeping the key interest rate near zero.

"It's a fascinating time," Buffett told investors, adding that the low-rate environment "is extremely comfortable."

"The economy went off a cliff in March [2020]," Buffett said. "The Federal Reserve's actions have resurrected it in an extraordinarily effective way."


7. Credit card balances should be avoided

The business closure and layoff pandemic has forced millions of people to rely on their credit cards to cover basic financial needs. It's a great survival strategy, but the resulting balances and high interest can cause a long-term financial problem.

During Berkshire's 2020 shareholder meeting, held online, he recalled advice he gave to a friend who ran into an unexpected event and wondered about the wisest way to spend it. She told Buffett that he also had credit card debt - with 18% interest.

"If I owed any money at 18%, the first thing I would do with the money I had would be to pay it off," Buffett recalled. "You can't go through life borrowing money at those rates and be better off."


8. Always be prepared for the worst

Buffet isn't called a soothsayer for nothing - in 2019, he warned that the world was about to be hit by a "mega-disaster" surpassing the chaos caused by Hurricanes Katrina and Michael. When the coronavirus first hit the US, Buffet said during an interview: "I've always felt there would be a pandemic at some point."

But one would expect that kind of foresight from someone so heavily invested in the insurance industry - Berkshire Hathaway owns Geico and several other insurers - where planning for the worst is a major part of the business model.

All materials and information on the K&L Rock website are drawn from publicly available sources and are for informational purposes only. Every care has been taken in their creation. The information published on K&L Rock's website is in no way intended to be legal, tax or investment advice, analysis or suggestions or offers to buy or sell investment instruments, the implementation of which may result in the loss of all invested assets. The investment recommendations so indicated are for informational purposes only and are not binding. In no event shall K&L Rock be liable for any damages that may arise in connection therewith. Therefore, only use companies licensed by the CNB or with a valid permit to operate in the Czech Republic for trading in investment instruments.

K&L Rock also declares that it is not liable for any direct or indirect damage resulting from trading on the capital markets in general, and posts in discussions expressing the views of readers may not be in line with the operator's position and therefore cannot be regarded as its views.

How to start investing?