The world’s greatest investor, Warren Buffett, knows how to take advantage of moments like these. When share prices are down, you have a great opportunity to accelerate your plans to build a £1 million portfolio, by investing ahead of the stock market rebound. Buffett can help you do it.
Despite the recent recovery, the FTSE 100 is still down 20% since its pre-coronavirus highs, so the buying opportunity has not yet passed. To help you choose, who better to take advice from than Warren Buffett? His words of wisdom can help you take advantage.
Perhaps the most important thing he tells us is that we have absolutely no idea where share prices are likely to go next. That means we do not know if the stock market rebound is likely to continue, or whether we will see another crash. Please don’t waste too much time fretting about it. Instead, listen to Warren Buffett.
1. Warren Buffett says: “Don’t watch the market closely.”
It’s been hard to turn your eyes away from this market, as it collapsed in March, then rebounded in April. Volatility is always fascinating. Be careful with it, though. If you nervously jab the buy and sell button every time the market moves, you will make poor decisions.
Where the stock market goes today tells us little about where it will go next. It could fly off anywhere, depending on the news flow. The stock market rebound could accelerate, or it could crash. Short-term movements do not matter, the long term does.
You should only buy shares today if you plan to hold them for the long term, by which I mean many years, until Covid-19 is merely a bad memory. If you sit anxiously watching every market movement, you will make rash decisions, as Warren Buffett warns.
2. “The light can at any time go from green to red without pausing at yellow.”
Don’t we just know it. On 23 March, the FTSE 100 fell below 5,000, people were waiting for it to fall to 4,500, 4,000… except it didn’t. The US Federal Reserve weighed in with stimulus, and investors bought the stock market rebound.
As Warren Buffett went on to say, nobody can tell you when the lights will change. I would add that you cannot sit around waiting for them either. You could be hanging around a long time. Buy shares when you have money to hand, pick your stocks carefully, then wait. At some point, the lights will turn green. Then off you go.
3. “The rear-view mirror is always clearer than the windshield.”
We all saw share prices fall in March. We then witnessed the stock market rebound in April. The future is not ours to see, not even if your name is Warren Buffett. History shows us that in the long term, stock markets beat almost every other asset class. If you buy when FTSE 100 stocks are cheap, you are giving yourself a head start. Whenever the stock market rebound finally comes.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.