Back in February of 2018, Warren Buffet, legendary investor and Berkshire Hathaway’s chairman and CEO, sat down with CNBC’s Becky Quick to discuss volatility in the markets and what to look for when investing. Please click on the following link to watch the full 13 minute interview: Buffet: Just looking at the price is not investing.
He talks about the impulsive mistakes that investors make when they see the price of their stocks move up and down and how people should reframe the ways in which they look at the markets and their own stock portfolios to avoid making emotionally driven decisions based solely on price.
“If you own stocks like you own a farm or an apartment house, you don’t get a quote on those every day or every week, you look at the business”
“If people just thought of stocks as pieces of businesses they would be so much better off than thinking of them as little things that move around in price”
“Some people shouldn’t own stocks at all because they get too upset with the price fluctuations. If you are going to do dumb things because a stock goes down, you shouldn’t own a stock at all”
“If you buy your house at $20,000 and somebody comes along and says I’ll pay $15,000, you don’t sell because the quote is $15,000”
“Some people are not actually emotionally or psychologically fit to own stocks, but they would [be] if they are educated on what you are really buying which is a part of a business”
“People would rather gamble. The idea that you could double your money in six months is why people go to the races, it’s why they go to Vegas or whatever it may be, they even know the odds are against them and they still do it, it’s a strong instinct to want to get rich fast, and I don’t know how to do it”
Warren Buffet on CNBC 02/26/2018
In these later stages of the economic cycle we typically notice investors’ desires to react emotionally to fluctuations in the markets. Behavioral coaching is one of the most important roles of an investment advisor and it is our job to help clients identify and ignore market noise. It’s important to not allow short term market events derail you from your true financial goals.
It is during times of market volatility that investors should be extra careful when evaluating decisions. We implement a diligent research-based approach when making investment decisions and focus on how these decisions are aligned with the long term goals of our clients. We believe that this mentality will serve us and our clients well in the long run.
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