Berkshire Hathaway’s Warren Buffet has warned against taking the easy way when investing, stating that investors will be better offer with an S&P 500 index fund rather than betting on single stocks. The billionaire was answering questions during the Berkshire Hathaway annual meeting during the weekend.
It is not easy to identify long-term winners.
The legendary investor says that inflation is hitting the country despite the recovery from the COVID-19 pandemic. He said that his portfolio companies had seen significant inflation in different sectors due to raw materials shortage and high savings for those that kept jobs but were deterred from spending during the lockdown. Buffett said it is challenging to identify long-term winners when investing. He likened the current situation to 1903, where there were over 2,000 car companies, but almost all of them failed despite cars having transformed lives since then.
According to Buffett, there is more to choosing stocks than figuring out which industry will give returns in the future. He added that it isn’t easy as it sounds. As a result, he sees those owning S&P 500 index fund faring better than those who will pick individual stocks. Interestingly, Buffett said that most novice investors who recently jumped into the market to pump up the value of GameStop were just gambling. He was critical of stock trading platforms such as Robinhood, which allows trading of stocks for free, saying that they encourage gambling.
Buffett lauds the government’s stimulus packages.
On the stimulus packages passed by Congress and the Federal Reserve’s policies, Buffett said that they had done a significant job sustaining the economy, considering interest rates are still low. Buffett says that it seems the US government learned a lesson from the 2008 recession and was swift to act. However, it is still challenging to predict the long-term consequences of these policies.
Currently, almost 85% of the economy runs in super high gear, and some inflation is witnessed. Since then, Buffett doesn’t regret selling his $6 billion stakes in major airlines despite significantly recovering stocks.
