We are currently living in uncertain times, to say the least. For many of us, our daily activities and behaviors have been completely changed; a large number of schools and businesses are temporarily closed and students and employees are learning and working from home. Due to the slowdown in human activity, the economy is (inevitably) also slowing down. Although uncertain times are far less common than prosperous times, thankfully, we can apply wisdom from past uncertain times to today (even though situations may not be exactly the same).
Warren Buffett has lived through many uncertain times. He was born near the height of the Great Depression in 1930 and leads one of the most successful holding companies in the U.S., Berkshire Hathaway. He’s seen almost everything, and there’s a great deal we can learn from his extensive experience with uncertainty and the stock market. Here are some great Warren Buffett quotes to keep in mind during this time of economic uncertainty.
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.”
Warren Buffett
We have been lucky over the last decade plus to have not faced a substantial amount of uncertainty in the economy. Growth has steadily continued and the unemployment rate kept shrinking. It is easy to forget that good economic times don’t continue on forever, in perpetuity. We’ve faced many great challenges, both domestically and globally, and we’ve always come out on the other side triumphant. There is no reason to imagine that this time will be any different.
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.”
Warren Buffett, 2016 Letter to Shareholders
It just so happens to be a little over a decade since the start of our last bull market. Dark clouds are everywhere today; an optimistic and positive economic outlook suddenly turned pessimistic and sour as we face a great challenge as a nation and a world. There is reason to be hopeful, though; we’ve seen other countries curb and control the spread of coronavirus. It seems that some economic disruption is likely, but we will return to normal. Businesses and schools will reopen, we’ll be able to enjoy large events like concerts and sports again, and the gears of the economy will start turning faster and faster.
Warren Buffett believes that uncertainty can create opportunity. If you believe in the long-term growth and upwards trajectory of the economy, disciplined investing can mean making the most out of downturns. Nobody knows where the bottom of the market will be, just as nobody knew we reached a peak in the market earlier this year; this is why dollar cost averaging can be so powerful.
Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.”
Warren Buffett, 2004 Letter to Shareholders
Speaking of dollar cost averaging, Warren Buffett is also a fan of disciplined investing. He says if you insist on trying to time the market, it is best to be greedy only when others are fearful. It seems like Warren Buffett is not a fan of trying to time the market and instead believes in systematic, disciplined investing. In uncertain times, disciplined investing can protect against the danger of putting too much money in or taking too much money out of the market at once.
If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
Warren Buffett
While it’s true that downturns can create opportunities for investors, short-term investing still comes with a substantial amount of risk. Over the short-term, the direction of the market can be impossible or nearly impossible to predict with any level of accuracy. Over the long-term, trends begin to emerge and we can see that the market consistently rises over time. A market downturn doesn’t make the short-term more predictable, and it may even make it less predictable.
Do not take yearly results too seriously. Instead, focus on four or five-year averages.”
Warren Buffett
It’s much too early to tell what the rest of the year has in store for the world and the economy, but it is best practice to focus on longer-term results instead of yearly results. Stock market returns vary greatly from year to year, so you can only begin to get an accurate picture of market performance when looking at a longer period of time. Statistically, good years far outweigh the bad years – for every bad year, you typically have about three to four good years.
Wisdom from Warren Buffett is seemingly never-ending, and we think there are many more life lessons to be learned. Our most recent show tries to uncover some of those life lessons; watch it now on YouTube below.
