In a lecture delivered at the University of Florida in 1998, Berkshire Hathaway Inc. Chairman and CEO Warren Buffett imparted wisdom on stock market investments. Buffett’s address focused on the foundational knowledge investors should possess, emphasizing the impersonal nature of stocks and the market’s indifference to individual feelings.
“My preferences have nothing to do with it,” Buffett said. “The market knows nothing about my feelings. That is one of the first things you have to learn about a stock.”
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He illustrated this point by discussing the emotional roller coaster investors often experience with their stock holdings and how these emotions bear no impact on the stock’s performance or the market’s movements.
“You’ve got all these feelings,” he said. “The stock doesn’t know you own it. Stock just sits there. It doesn’t care what you paid. It doesn’t care that you owned it or anything. So any feeling I have about the market is not reciprocated. I mean, it is the ultimate cold shoulder we’re talking about here.”
The essence of Buffett’s message is the value of adopting a rational, long-term perspective on stock investments. He argued that most people in the audience would likely be net buyers of stocks over the next decade, making it in their interest to prefer lower stock prices to maximize their buying potential. This principle extends beyond stocks to everyday consumer goods, drawing a parallel to preferring lower prices for items like hamburgers or Coca-Cola when shopping.
Buffett emphasized the significance of understanding market fluctuations, referencing Benjamin Graham’s “The Intelligent Investor,” particularly Chapter 8’s discourse on stock market attitudes and Chapter 20 on the margin of safety. These chapters, Buffett said, contain pivotal lessons on investing, including the value of purchasing stocks at a discount and incorporating a margin of safety to mitigate potential losses.
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If you’re not sure about investing, consulting with a financial advisor can help. They can create investment plans that match your financial goals based on how much risk you’re comfortable with and your timeline. Whether you’re saving for retirement, a big purchase or just want to increase your savings, a financial adviser can give you useful tips and advice to help you make smart investment choices.
The takeaway from Buffett’s speech is the importance of recognizing that stock price movements are neither inherently good nor bad. Instead, investors should focus on the underlying value of businesses and their earning potential. Buffett advises against being swayed by the barrage of marketing and media aimed at influencing investment decisions. Instead, he champions a thoughtful and informed approach to investing that prioritizes long-term value over short-term price fluctuations.
Buffett’s insights are a reminder that successful investing requires discipline, a clear understanding of market fundamentals and an ability to remain unaffected by the noise that pervades the financial world. His teachings encourage investors to focus on what truly matters: the intrinsic value of businesses and the opportunity to buy into them at favorable prices.
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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.
Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.
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