- Warren Buffett first outlined this investing strategy in 2008.
- Ten years later, the Oracle of Omaha’s strategy still works.
- Buffett recommends investors ignore mob mentality and focus on fundamentals.
Warren Buffett has long been known for being a somewhat contrarian investor. “Be fearful when others are greedy, and be greedy when others are fearful,” is one of his best-known maxims. This philosophy was put to the test in 2008 when the stock market collapsed.
Buffett put his money where his mouth was, buying General Electric, Goldman Sachs and other American stocks. “In short, bad news is an investor’s best friend,” he wrote in a 2008 op-ed to the New York Times. “It lets you buy a slice of America’s future at a marked-down price.”
He also wrote that “fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records five, 10 and 20 years from now.”
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Buffett Proves His Long-Term Investing Strategy Right
Ten years after this bold statement, the Oracle of Omaha’s logic has proven sound. Since the collapse of Lehman Brothers in 2008, the S&P 500 index has increased by 130 percent. Amazon and Apple have both reached valuations in excess of $1 trillion. An investment in Apple in 2008 would be worth nine times as much now 10 years later, excluding dividends.
Buffett admitted he was a little off the mark during a September 2018 CNBC interview, but not by much. The markets continued to drop in 2009, so in hindsight, Buffett might have been a little ahead of the game. “It was right on a long-term basis,” he said, “but it was way off for four or five months at least.”
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More Warren Buffett Investing Advice You Should Follow
Buffett’s maxims continue to prove themselves, even if many investors don’t follow them, thinking instead they can outsmart the market. “Though investors are generally rational, they occasionally do crazy things,” he said in a 2018 letter to shareholders.
“What investors need is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals,” he wrote. “A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.”
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