What does Warren say?

October 15th, 2008

Warren Buffett, the greatest investor of all time, used to say that you should be fearful when everyone is greedy and greedy when everyone is fearful. Nowadays, most investors surely fear that the market is going into a long recession, a recession that will make stock investing a non-attractive investment component. As history clearly shows, the market eventually recovers and Buffett’s phrases become true in reality.

Recently, Warren gave an exclusive, detailed, interview to Charlie Rose (featured by Google Videos). It is very interesting to see how Buffett still strongly believes in his investing philosophy despite the steep market drop.

The average analysts or your investment advisor will probably tell you just the opposite, but I definitely agree with Buffet that if you have a long term investing horizon, now is the right time to buy new stocks, and definitely not sell your holdings. Even if the market drops further down, there are already plenty of undervalued stocks in the market; these stocks could possibly be cheaper next month, but they will surely trade at substantially higher prices a few years from now. Since the price movements of stocks cannot be predicted in the short term, it’s not a wise idea to wait for next month.

Warren has already started using his large cash reserve to buy many additional stocks. As usual, he is focused on strong and stable companies that have lost value or their earning was decreased in the short term, such as General Electric (GE) and others.

Note that as always, Buffett recommends that the average (passive) investor that doesn’t want to spend the extra time required to evaluate companies’ fair value and pick his stocks by himself, to concentrate on buying a low cost Index Fund or an Exchange Traded Fund (ETF). This doesn’t require any additional research and it gives the market the opportunity to do the work for you.

Last 5 posts by Yinon Arieli

• How cheap are stocks now? - October 26th, 2008
• New Wall Street Terminology - October 18th, 2008
• Should you buy now or wait for a better time? - October 2nd, 2008
• Understanding Fundamental and Technical Analysis - September 27th, 2008
• Who’s going bankrupt next? - September 22nd, 2008

Tags: stock market, Warren Buffett

Entry Filed under: Stock Investing Ideas