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Berkshire Hathaway’s Warren Buffett describes the stock market as a “drunken psychoâ€. Source: AP
THE world’s third richest man has revealed how he made his billions — and it’s not as complicated as you’d think.
Berkshire Hathaway CEO Warren Buffett, 84, is arguably the world’s most closely watched investor, with a net worth of more than $A90 billion.
There’s one thing many investment strategies boil down to: Do what Warren Buffett is doing.
In an interview hosted by money website Benzinga last week, the always quotable Buffett had a few new pearls of wisdom for the history books.
Asked for the secret to his investing success, the “Oracle of Omaha†took a leaf from Nike.
“The most important thing to do is just do it. Pay no attention to the headlines in the paper or people on television. Just put aside a little money every month — put it in a very low-cost index fund,†he told Quicken Loans founder Dan Gilbert and president Jay Farner.
“If you do that throughout your working career you’re bound to have substantial capital in the end. Don’t try to time it, don’t try to pick individual stocks, just put X dollars per month away and you’ll live a very comfortable life.â€
Don’t try to pick individual stocks — just put a little money away every month. Source: AP
He went on to liken the stock market to a “drunken psychoâ€. “You can ignore [the stock market]. You’ve got your choice of thousands of businesses, and the best thing for most people is to buy a cross-section of them,†he said.
“But every day I get offered through the stock market thousands of businesses, and the prices change every day, and the nice thing about it is that this imaginary person out there, Mr Market, is kind of a drunken psycho.
“Some days he gets very enthused and some days he gets very depressed. And when he gets really enthused, if you happen to be trading stocks, you sell to him. And if he gets very depressed, you buy from him.
“There’s no moral taint attached to that. When people get scared other people get scared, and when they get exhilarated, [other people] get exhilarated.
“Emotions are contagious, and emotions have no business in investing.â€
Want to get rich like Warren Buffett? Then dont just sit back and buy the companies that Warren Buffett is buying. MarketWatchs Mark Hulbert offers a real guide to getting rich. Photo: Getty Images.