Billionaire Warren Buffett’s annual letter to Berkshire Hathaway shareholders in 2018 teaches valuable lessons about investing and the need to stay focused when trading the stock markets.
Warren Buffet is known for holding a large amount in banks that could be invested in companies by buying the stocks. He claims that we should have cash on hand when the opportunity comes and people don’t have the money to buy stocks. He believes that the markets are volatile and that cash should be available when the stock market crashes as it provides ample opportunity to buy stocks at a very low price. However, you can do this if you have cash and your capital is not yet fully invested.
‘To risk what you have … to get what you don’t need, insanely.’
Warren Buffet writes:
“Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. We both think it’s crazy to risk what you have and need to get what you don’t. We took this view 50 years ago when we both ran an investment partnership funded by some friends and relatives who trusted us. We’re doing it today after we were joined by around a million “partners” at Berkshire. “
Equity investments are not just “ticker symbols”
“Charlie and I view the common market shares that Berkshire owns as equity interests in companies, rather than as ticker symbols to be bought or sold based on their chart patterns, analysts’ price targets, or the opinions of media professionals. Instead, we simply believe that if the ventures’ businesses are successful (as we most believe), so will our investments. Sometimes the payouts will be modest for us; Occasionally the cash register rings loudly. And sometimes I make expensive mistakes. Overall – and over time – we should get decent results. In America, equity investors have the wind behind them. “
Why Investors Shouldn’t Use Borrowed Money to Buy Stocks
“There’s just no telling how far stocks can fall in a short space of time. Even if your credit is low and your positions are not immediately threatened by the market collapse, scary headlines and breathless comments can rock your mind. And an insecure mind will not make good decisions. “