How to invest in 2024: 3 tips from Warren Buffett

Karl 28th Feb 2024 No Comments

Reading Time: 4 minutes

Legendary investor and Berkshire Hathaway chairman, Warren Buffett, has just released his annual letter to shareholders. In it, the 93-year old provides some interesting tips and insights on how investors should navigate the stock market over the coming months.

So what exactly does Buffett say in his letter? And how can everyday investors take inspiration from the Oracle of Omaha?

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- Warren Buffett’s 3 tips for investors
- Who is Warren Buffett?

Warren Buffett’s 3 tips for investors

On Saturday 24 February, Warren Buffett released his annual letter to Berkshire Hathaway shareholders. Even at the ripe old age of 93, Buffett remains chairman and owner of the group, and uses his annual letter as a way of communicating to Berkshire’s ‘diverse and ever-changing’ group of owners.

While his letter is penned to Berkshire’s shareholders, they’re posted publicly on Berkshire’s website. This means investor’s without an interest in Berkshire can still read Buffett’s thoughts for the year ahead.

In his letter for 2024, Buffett begins with a touching reference to Charlie Munger, former vice-chairman of Berkshire who passed away last year. In his reference, Buffett describes Munger as the ‘architect’ of the present Berkshire Hathaway, highlighting Munger’s belief that their annual letter was an important obligation to communicate with Berkshire’s three million account holders.

So what can we learn from Buffett’s most recent letter to shareholders? Let’s take a look…

Buffett is bullish about US stocks.

In his letter to shareholders, Buffett writes that much of his current holdings are in US-based stocks. Buffett explains: “I can’t remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good.”

Buffett goes on to recite an anecdote about how he found himself $5 down when he invested in US stocks for the first time. Nevertheless, Buffett continues his praise from American stocks: “America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one.”

This all suggests that Buffett continues to stay bullish about stocks across the pond right now, and who are we to argue? We recently wrote a piece on why US based stocks are soaring right now, and it would take a brave soul to bet against Uncle Sam at the present moment.

Interested in investing in US firms? See how to buy US shares in the UK.

The importance of avoiding ‘serious mistakes’

Further down his letter Buffett writes about the possibility of a stock market crash. Buffett explains: “Occasionally, markets and/or the economy will cause stocks and bonds of some large and fundamentally good businesses to be strikingly mispriced. Indeed, markets can – and will – unpredictably seize up or even vanish as they did for four months in 1914 and for a few days in 2001.”

Yet despite this doom and gloom, Buffett highlights how it’s important to expect the unexpected, and not to ‘panic’ whenever a market experiences a downturn. He explains how Berkshire will not make bad decisions when the going gets tough. He explains: “I believe Berkshire can handle financial disasters of a magnitude beyond any heretofore experienced. This ability is one we will not relinquish.

“One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been – and will be – rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes.”

In other words, Buffett explains how his firm will avoid the temptation to panic sell should a market downturn occur in the future.

Be wary of so-called ‘experts’

Arguably the most interesting paragraph in Buffett’s most recent letter is the one where he warns about trusting the so-called experts when it comes to making stock market decisions.

In this paragraph, Buffett references his sister Bertie who, despite being an intelligent individual, wouldn’t pass a stringent accountancy exam, nor would she consider herself an economic expert. Despite this, Bertie instinctively knows that “…pundits should always be ignored”.

Buffett elaborates: “….if she [Buffett’s sister] could reliably predict tomorrow’s winners, would she freely share her valuable insights and thereby increase competitive buying? That would be like finding gold and then handing a map to the neighbors showing its location.”

Buffett goes on to explain that his sister “understands the power – for good or bad – of incentives, the weaknesses of humans, the “tells” that can be recognised when observing human behavior. She knows who is “selling” and who can be trusted. In short, she is nobody’s fool.”

What we can take from this is that Buffett believes many experts have vested interests, so any tips should often be taken with a pinch of salt. This also loosely highlights why we’ve seen Buffett previously shout about the benefits of a passive investment approach by buying an index tracker fund and forgetting about your portfolio.

Who is Warren Buffett?

Warren Buffett is widely regarded as one of the most successful investors in the world. As the chairman and CEO of Berkshire Hathaway Buffett he has amassed a fortune through value investing. At the time of writing, Buffett is reported to have a net worth of $134 billion (£105bn).

Buffett acquired the nickname the ‘Oracle of Omaha’ after his hometown in Nebraska, USA. Buffett is a strong believer in a long-term investment approach, and makes a big effort to understand each and every business he invests in. Meanwhile, Buffett is also known for investing in companies with a ‘competitive advantage’ which can explain why he has hefty exposure to the likes of Apple, Coca-Cola, and Visa.

Despite his vast wealth, Buffett is renowned for living a modest lifestyle. It is suggested that he still lives in the original home he purchased back in 1958!

If you’re interested in learning more about Buffett’s investing strategy, take a look at our article: Can you make a million investing like Warren Buffett?

And while we’re at it…. do you want to learn more about investing? Sign up for our fortnightly MoneyMagpie Investing Newsletter. It’s free and you can unsubscribe at any time.

Disclaimer

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