It's no secret that inflation has been one of investors' primary concerns on the ASX share market over the past year or two. After lying dormant for more than a decade, inflation rates around the world took off during 2022. This inflation, along with the rising interest rates that it has prompted, has caused many investors to recalibrate their investing strategies. But what does Warren Buffett think about investing in 2023?
Warren Buffett is one of the greatest investors of all time. His truly astonishing near-60-year career as the CEO and chair of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) has resulted in the shareholders of Berkshire enjoying astronomical share price returns.
As our chief investment officer Scott Phillips covered earlier his week, Buffett has managed to engineer an average gain for Berkshire shareholders of 19.8% per annum over the past 58 years. In cumulative terms, that works out to be a gain of 3,787,464%.
So this is a man who knows how to navigate all forms of economic weather. And has become eye-watering rich in the process.
But what can Buffett teach us about how to invest in 2023?
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Buffett's advice to investors in 2023
Well, he has just released his latest letter to the shareholders of Berkshire Hathaway – a great place to start. Every year, Buffett pens an expansive letter to his fellow shareholders. This is typically jam-packed with insightful commentary on the investing world. As well as wisdom on how to think and invest prudently.
In his latest letter, Buffett said this on worrying about economic forecasts:
Charlie [Munger] and I… firmly believe that near-term economic and market forecasts are worse than useless. Worse than useless. Our job is to manage Berkshire's operations and finances in a manner that will achieve an acceptable result over time and that will preserve the company's unmatched staying power when financial panics or severe worldwide recessions occur.
So focus on the big picture, Buffett is saying between the lines.
But how does one invest going forward into 2023? Well, here's some more Buffett wisdom on navigating an uncertain future:
In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than so-so. In some cases, also, bad moves by me have been rescued by very large doses of luck…
Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years – and a sometimes-forgotten advantage that favors long-term investors such as Berkshire.
The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.
Buffett points out that when he bought US$1.3 billion worth of Coca-Cola Company (NYSE: KO) shares in 1994, Berkshire received US$75 million worth of dividend payments. By 2022, the annual income stream from these Coke shares had increased to US$704 million.
As Buffett would put it, this 'flower' has been able to ratchet up its dividends significantly. That's despite the Asian financial crisis, the dot-com bust, the global financial crisis, the pandemic, and now high inflation and rising rates.
Thus, Buffett is saying that if you find real top-tier shares, you won't have to worry about inflation, or anything else.
