The Money Guru: Warren Buffett on timing the market

You would think that the world’s most renowned investor knows a thing or two about picking the right time or buy or sell shares, but Warren Buffett, chairman and CEO of Berkshire Hathaway, dispelled such notions during the company’s latest shareholder meeting.

“We haven’t the faintest idea what the stock market is gonna do when it opens on Monday — we never have,” he told the audience.

The multi-billionaire, then, did not amass his wealth by timing the market, but by deeply researching companies and their performance, and holding onto stocks long-term instead of riding market waves.

The strategy of looking for stocks that are cheaply priced relative to their estimated true value has grown his company into a massive conglomerate, buying and holding massive positions in Apple, Bank of America, American Express, Coca-Cola, Dairy Queen, HP, and many others.

Mr Buffett once famously quipped: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”

Instead of focusing on the supply and demand intricacies of the stock market, he looks at companies as a whole, taking into consideration their performance, debt, and profit margins.

He also analyses their weak points, including how dependent they are on commodity markets, for example.

His methods, known as value investing, have led him to become one of the world’s richest people, with an estimated net worth of around €100 billion

That said, even the respected investor admits that insightful timing has its place. At a shareholders’ meeting, he acknowledged that he “messed up” during the market crash in March 2020, when he could have used the more than €100bn of the company’s cash on hand to take entry positions in some remarkably undervalued stock.

He said that if he “had any sense of timing,” he would have bought stocks as the COVID-19 pandemic started spreading.

“I totally missed that opportunity, I totally messed up in March of 2020,” he said. “We haven’t ever timed anything. We’ve never figured out insights into the economy.”

The Money Guru is a BusinessNow.mt column presenting insights from some of the top business and investment minds from around the world. Are you looking for advice on a particular subject, or found useful tips you would like to share with a wider audience? Drop us a line on our Facebook Page.