Warren Buffett – considered by many to be the greatest investor of all time – is now known by his veritable bible of folksy quotes almost as much as his stellar investing track record these days.
As chairman and CEO of his company Berkshire Hathaway, Buffett has achieved an average compounded rate of return of more than 20% per annum since 1965 – more than double the market average.
So I think he is a man well worth listening to – especially in times like these.
1) Be fearful when others are greedy, and be greedy when others are fearful.
This quote is probably Buffett’s most famous – but its timeless relevance shines strongly in this dark time for the markets. Fear is certainly the emotion with the upper hand right now. And that means it’s a good time to be greedy, according to Mr Buffett. So have a look at your favourite ASX shares, you might find they’re at a good price to warrant some greed!
2) Only when the tide goes out do you discover who’s been swimming naked.
This is a less optimistic quote that I feel has suddenly become a lot more relevant. Up until recently, the economy was going along very smoothly with very low interest rates. That means that companies that might not be viable in all economic climates have been allowed a lot of breathing room.
But these companies are the ones that might not be so fortunate now times are tough and might be caught ‘swimming naked’ as Buffett puts it. So have a good, hard look at the companies that might not be profitable and have big debt loads. You don’t want to be stuck with a nude swimmer during this time!
3) In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
I think this quote is a great one to end on. It reminds us that tough times always pass and lead on to even better times. The stock market is a resilient beast and has shrugged off everything the world has thrown at it for more than a hundred years. So I think it is a great time to be greedy (from quote 1) and think about which businesses you would like to own in 2025 or 2030. Buying them today is probably a good move!
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.