Warren Buffett Says Stock Market Is Becoming ‘Casino-Like’ — How To Invest and Not Gamble
Written by
Dawn Allcot
Edited by
T. Woods
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With meme stocks still rising in popularity — if not necessarily in value — and the Reddit IPO launching this week, the stock market has been showing volatility that’s difficult to predict, largely driven by retail investors.
In Warren Buffet’s annual letter to Berkshire Hathaway investors, Buffett compared today’s stock market to a casino, with investors buying and selling rapidly in the hopes of winning big.
“For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young,” he wrote. “The casino now resides in many homes and daily tempts the occupants.”
Of course, Buffett was referring to stock trading apps that allow investors to make quick, emotional choices and follow the whims of the market.
In his letter, after paying tribute to his late business partner Charlie Munger, Buffett offered advice to help people make smart investment decisions that are more likely to grow your savings over time.
Don’t Listen to the Pundits
Buffett often uses his sister, Bertie, as an example of a typical Berkshire Hathaway shareholder. Bertie knows to ignore the pundits and buzz surrounding certain investments.
“After all, if she could reliably predict tomorrow’s winners, would she freely share her valuable insights and thereby increase competitive buying? That would be like finding gold and then handing a map to the neighbors showing its location,” Buffett wrote.
Likewise, he said, “America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one.”
Buy When Others Are Selling
Two decades ago, Buffett famously said, “”Be fearful when others are greedy, and be greedy when others are fearful.” Buffett purchased his first stock on March 11, 1942, when the Dow Jones Industrial Average plunged below 100. “I was down about $5 by the time school was out,” Buffett wrote.
Today, Buffett is a billionaire with a net worth of $106 billion, according to Forbes Billionaires List.
Never Risk Capital
As an investor, Buffett is about as conservative as you will find.
“One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been — and will be — rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes,” he wrote in his letter.
Invest in Successful, Long-Running Businesses That You Trust and Understand
“Berkshire is not big on newcomers,” Buffett wrote, noting that American Express and Coca-Cola launched in 1850 and 1886, respectively.
In 2023, Buffett’s company didn’t buy or sell AMEX or Coke, holding both. Buffett predicted that both brands will increase their dividends in 2024. He attributed the companies’ success to creating “timeless essentials of our world.”
Today’s trading apps make it easy to buy and sell stocks quickly, but investing in brands you trust with staying power and holding for the long-term can take some of the risk out of trading.
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