Looking for investment mantras? Here are Warren Buffett’s 5 pearls of wisdom

In his annual letter to stakeholders, billionaire Warren Buffett shared some pearls of wisdom with stakeholders and investors on cash holdings and capital allocation, particularly during tough times like a recession.

Buffett said his company Berkshire Hathaway will always ensure to have significant cash and funds in US Treasury bills in order to avert any crisis-like situations.

Cash Key
Berkshire will always hold a boatload of cash and US Treasury bills, and will avoid such investment decisions that could result in any uncomfortable cash levels at inconvenient times, including financial panics and unprecedented insurance losses, Buffett said.

In each of the past 3 years, Berkshire’s diverse group of businesses generated net operating cash flows between $37 billion and $40 billion.


Capital Allocation
One of the key parameters for investors while investing in the stock of a company is the trust in the management and its capital allocation policy that will help drive growth and returns to stakeholders. Berkshire owns publicly traded stocks based on its expectations about the long-term business performance, and not because they view them as vehicles for adroit purchases and sales.

Buffett advises investors to think about themselves like the owner of the company they invest in. “Charlie and I are not stock-pickers; we are business-pickers,” he said.

Turn Volatility Into Opportunity
According to Buffett, the best time to invest in the market is when other investors are very fearful.

Buffett’s words come at a time when equity markets, particularly in India, are extremely volatile amid the prevailing global uncertainties. From being the best performing market, India became the worst performing market in 2023.

But, there are several pockets that offer both value and growth, and one needs to see this volatility as an opportunity to invest in such quality companies.

Forecasting Market
At a time when economists and governments are making predictions of a recession and its impact on the economy and businesses, Buffett pleads ignorance.

“We firmly believe that near-term economic and market forecasts are worse than useless,” he said, adding that one needs to think as well as remain long-term investors in the market, while ignoring the noises.

Patience
Patience is the only best way to make great money from investments, believes Buffett. “Not focussing on the froth of the market, we seek out good long-term investments and stubbornly hold them for a long time,” he said in the newsletter.

The world is full of foolish gamblers, and they will not do as well as the patient investor, the billionaire believes.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)