Berkshire Hathaway shareholders flocked to Omaha, Nebraska over the weekend to hear from legendary investor Warren Buffett and his sidekick Charlie Munger, along with other company executives. It was the conglomerate’s first in-person meeting since 2019, and tens of thousands of shareholders turned out to hear what the company’s 91-year-old chairman and CEO had to say about business, economics and investing.
Berkshire’s massive business touches many different areas of the economy, including insurance, retail, manufacturing, energy, and more, making it a good benchmark for the current economic landscape. The company owns dozens of different companies, including Geico, Dairy Queen, and BNSF Railway, as well as significant stakes in Apple, Bank of America, Coca-Cola, and American Express.
Here are the key lessons for investors from Berkshire Hathaway’s 2022 annual meeting, known as the “Woodstock for capitalists.”
6 Best Lessons From What Buffett Said at Berkshire Hathaway’s Annual Meeting
1. Make sure your portfolio is viable
Berkshire is known for keeping a large amount of cash on its balance sheet, and some have criticized Buffett for not investing more aggressively with that cash. However, he stressed the importance of holding enough cash to ensure the company can always survive, especially during market panics akin to the 2007-2009 financial crisis.
“We’re always going to have a lot of cash on hand,” Buffett said. “There have been times in history, and there will be times more in history, where you can’t play the next day if you don’t have it.”
“It’s like oxygen,” he added. “It’s there all the time, but if it goes away for a few minutes, it’s all over.”
You can use the same approach for your own portfolio. Avoid taking positions that could cause you to realize a permanent loss or using techniques that could harm you in a crisis, such as B. Margin Trading. A saved emergency fund can help you get through the inevitable crises in your own life.
2. Focus on value, not market timing
Buffett reminded shareholders that he never knows what the stock market will do in the short term, so trying to “time the market” is a bad investment strategy. Investors who believe that they can enter and exit the market at the right time will most likely not succeed.
“We weren’t good with timing,” Buffett said. “We’ve been pretty good at figuring out when we’re getting enough bang for our buck.”
Buffett pointed out that they were early in committing funds during the 2008 financial crisis, saying he “completely missed the opportunity” in March 2020.
If you’re investing yourself, make sure you’re focusing on the value you’re getting from the investment, or how much you’re paying relative to what the asset is producing, rather than whether you think you will the price will go up or go down immediately.
3. Owning productive assets is the way to go
Investors have many choices about where to invest their money. Buffett again made his preference clear: assets that create value for their owners. There are many investments that fall into this category, including stocks, bonds, real estate, farmland, and more.
Recently, cryptocurrencies have burst onto the investment scene and attracted a lot of interest from traders and the media, but Buffett has made it clear that he’s not a fan.
“If you told me you owned all the bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it?” Buffett said.
Owning an apartment building yields rental income and farmland produces food, Buffett said, but cryptocurrencies like bitcoin produce nothing for their owners.
“That explains the difference between productive wealth and something that depends on the next guy paying you more than the last guy got,” he said.
4. Stay away from Bitcoin and other cryptocurrencies
Buffett and Munger both made it clear that their opinions on bitcoin and cryptocurrencies haven’t changed since they started warning investors about their dangers. Buffett called Bitcoin a “fantasy” in 2014, but 98-year-old Munger took it a step further at this year’s gathering.
“In my life, I try to avoid things that are stupid, nasty, and make me look bad in comparison to someone else — and bitcoin does all three,” Munger said.
Munger, known for his strong opinions, said bitcoin is dumb because “it’s very likely to go to zero” and evil because it undermines the Federal Reserve and the national monetary system. Finally, he said it makes the US look bad compared to China because the communist country was smart about banning cryptocurrencies outright last year.
“If you have your own retirement account and your friendly advisor suggests investing all your money in bitcoin, just say ‘no,'” Munger added.
5. Avoid the speculative nature of the stock market
The stock market has always been a combination of legitimate investing and more casino-style speculation, Buffett said, but the past few years have veered more toward the speculative side.
“It’s a gaming parlor,” Buffett told shareholders, adding that Wall Street contributed to the casino mentality. “They don’t make money unless people do something … and they make a lot more money when people gamble than when they invest.”
“We’re almost in a speculative frenzy now,” Munger said. “We have people who know nothing about stocks being advised by stockbrokers who know even less.”
It pays to look at your own portfolio and see if you fall more into the investment category or the gambling activities category. If you trade frequently, constantly buying and selling positions, you may be lining the pockets of someone other than yourself.
One investment option Buffett has recommended in the past that will drastically reduce the fees you pay is investing in an S&P 500 index fund. This way you own a diversified portfolio of American companies and pay very little to invest in them.
6. Your skills cannot be taken away by inflation
With inflation at its highest level in 40 years, shareholders wondered how they could protect themselves from losing purchasing power as prices rose.
“The best thing you can do is be exceptionally good at something,” Buffett said. “Whatever abilities you have, they can’t be taken from you – they can’t really be given to you.”
Buffett said the way you get paid, or the amount, can change with inflation, but if you’re the best at what you do, people will always be willing to trade some of their production for that what you deliver.
“By far the best investment is anything that develops on its own,” he said.
(Here are some of Buffett’s other top tips for fighting inflation.)
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that past performance of the investment product is no guarantee of future price increases.