There’s one person I reckon was probably completely unfazed by the Covid-19 pandemic. Well, in terms of his investments, I mean. And that’s Warren Buffett. He famously urges investors to buy with a long-term horizon, urging us to “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years“.
Wouldn’t it have been great if the UK stock market had closed in January 2020? Nobody would have suffered any losses as their share prices crashed — without a market, there wouldn’t be any share prices, so no crashes. Then, once the pandemic was behind us, the London Stock Exchange could open its doors again, and the FTSE 100 could carry on as usual. And it wouldn’t take 10 years. No, we’re less than a year and a half into it, and UK share prices are already looking a lot stronger.
But wait. I, for one, am very glad that the markets didn’t close in a misguided attempt to protect us from short-term losses. The thing is, I haven’t suffered any losses. Sure, some of the stocks I own slumped in price. But they’ve already mostly recovered. And there’s another bit of Warren Buffett advice that I’ve used to offset the rest.
Warren Buffett’s gold
Here’s the quote I’m thinking of: “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble“. I’ve seen the past year and more as one long opportunity. An opportunity to buy good shares at cheap prices. That’s what I’ve been doing, and the gains I’ve already made from my new purchases are enough to cover what’s left of those existing declines. Now, I didn’t have huge amounts to invest. Just modest sums, every few months. And I put the money into the same shares I’d have bought anyway.
I’m still seeing plenty of the golden opportunities that Warren Buffett speaks of. Some UK shares have recovered well, but I think they’re still some way short of a sensible long-term valuation. Some are still depressed, and some of those are genuinely struggling and, I think, to be avoided. But there are surely some very good shares still going cheap right now.
My favourite lesson
One more thought from Warren Buffett: “You only have to do a very few things right in your life so long as you don’t do too many things wrong“. In my view, if I’d sold off my shares after the stock market crashed, I would definitely have done something wrong. Avoiding that one mistake has probably done me a lot more good than any number of my buy decisions.
That’s the one key lesson that I’m taking forward. Doing things right is good. But not doing things wrong is even better. And I’m certainly going to remember that next time there’s a stock market crash, and it’s raining gold in the form of cheap shares again.