The Smart Investor
    Facebook Instagram
    Sunday, October 1
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Smart Investing»7 Warren Buffett Tips to Help You Navigate a Choppy Stock Market
    Smart Investing

    7 Warren Buffett Tips to Help You Navigate a Choppy Stock Market

    Here are some useful tips from the Oracle of Omaha to help you steer the current volatile market.
    Royston YangBy Royston YangAugust 23, 20215 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    During times of market uncertainty, it’s natural to look for guidance to calm your senses.

    And there’s few better to dispense such advice than Warren Buffett.

    Buffett is widely acknowledged as one of the most successful investors in the world, earning him the nickname “the Oracle of Omaha”.

    The noise and volatility that has roiled the markets in the last 18 months would make most investors uncomfortable.

    Here are seven useful tips you can rely on from the Oracle to help you to navigate the stock market.

    1. Price is what you pay, value is what you get

    Amid the noise, it’s important to remember that the value of a stock is different from the price that you paid for it.

    Unfortunately, many investors tend to equate price with value.

    To give an example, let’s say a company is worth $10 per share.

    However, people are willing to pay just $8 to own the company as they may believe the remaining two dollars cannot be unlocked.

    Hence, in this situation, it’s possible to pay a “discount” and obtain a company with assets of $10 per share for just $8.

    Value investors understand this well and actively seek to buy bargains — paying much less for businesses than what they are worth.

    2. Look for companies that can raise prices during periods of higher inflation

    Inflation is a threat that erodes the value of your money over time.

    If you let your money sit in a bank account, it will almost surely get eaten away by inflation, leaving you with less spending power in the future.

    The key to beating inflation, therefore, is to find companies that can continually raise the prices of their products and services without harming their margins and profits.

    These businesses usually have a strong market position and competitive advantage that allows them to do so.

    And these are the types of stocks you should invest in and hold for the long term.

    3. Never invest in a business you cannot understand

    It may sound obvious, but you’d be surprised how many investors place their money in businesses they can’t explain in two lines.

    The basic prerequisite to remember is to only invest your money in a business that you can understand easily.

    If the business is too complex or uses too much business jargon, it would be wise to move on to something simpler.

    4. It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price

    Buffett’s quote here speaks to the quality of the underlying business.

    Rather than searching for companies that are priced cheaply but are mediocre businesses, he suggests that you pay up for quality.

    So, don’t hesitate to cough up a little bit more if you believe a business is outstanding.

    Owning a great company is better in the long run as it allows you to compound your wealth and build up a pot of money for your retirement.

    5. Our favourite holding period is forever

    Time is required for a business to grow and become more valuable.

    Buffett believes that if you can’t hold a business for 10 years, then don’t bother owning it for even 10 minutes.

    Great companies tend to get better over time, ageing gracefully just like fine wine.

    And when a company reports ever-increasing profits and cash flows, their share prices and dividends should naturally also head up.

    Naturally, you want to be a shareholder as share prices head up. 

    6. Remember that the stock market is a manic depressive

    The stock market is more than cold, hard math defined by financial figures.

    Share prices are also affected by basic human emotions such as greed and fear.

    As a result, share prices are prone to extreme swings depending on whether investors as a whole are feeling optimistic or pessimistic.

    This manic-depressive behaviour means that companies’ prices can bounce around wildly even though there has been little change in its underlying business.

    Investors will do well to remember this fact so that they can take advantage of the market when it is depressed to scoop up bargains.

    The market may act emotionally, but you shouldn’t.

    7. Beware the investment activity that produces applause; the great moves are usually greeted by yawns.

    Investment portfolio managers usually feel compelled to act based on the latest news, even when doing nothing is typically a much wiser choice.

    This bias towards action stems from the fact that they feel that they are being paid to “do something”.

    As a retail investor, you should resist the urge to make changes to your portfolio that may be wholly unnecessary.

    A sharp decline in the market isn’t always a reason for you to buy.

    Conversely, when the market surges to a new all-time high, you should not feel motivated to sell, either.

    The greatest “move” you can make is to just sit tight and continue to own great businesses.

    It may sound utterly boring, but you can bet the rewards are anything but!

    Looking for more dividend stock ideas? Then you’ll want to know about these 5 strong SGX companies. We’ve prepared everything you need to know in a FREE special report: “Dividend Stocks That Can Pay You For Life”. Click here to download now.

    Follow us on Facebook and Telegram for the latest investing news and analyses!

    Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    (TSI) inflation

    Get Smart: A Simple Way To Beat Inflation

    October 1, 2023

    Top Stock Market Highlights of the Week: Singapore’s Inflation, Alibaba’s Logistics IPO, City Developments Limited and Grab Holdings

    September 30, 2023
    (TSI) Investment moats

    The Importance of Investment Moats

    September 29, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.