The FTSE 100 has seen positive returns so far this year, but it’s not been a smooth ride. Even last week we saw a sell-off of around 2.5% on one morning. Investors were concerned about the situation in Afghanistan and the rise of the Delta variant. Yet throughout the bumpy ride, I continued to glean a lot from the stock tips of Warren Buffett. He’s a legendary investor who’s still going strong even at 90 years of age. Here are a few points I’ve been using in 2021.
Remaining calm during volatility
Buffett has been quoted as saying that we should “buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market”.
This has helped me in periods during the year when the stock market looked like it was going to crash again. A month ago, the market had a wobble and dropped below 7,000 points. It looked like it could go even lower, largely due to rising inflation expectations. But understanding Buffett’s quote helped me to remain patient and not to panic-sell.
The stocks that I own in my portfolio I’m happy with, so short-term shifts shouldn’t materially impact this fact. In turn, this helped to boost my long-term returns. How? Well if I did panic-sell last month, I’d likely have bought back in but at higher levels. So I would have lost out on the extra return that I would have got by simply not selling in the first place.
Building a strong portfolio now
Another great quote from Warren Buffet regarding stocks is that “predicting rain doesn’t count. Building arks does”.Â
This Biblical reference means that predicting rain can be likened to trying to predict the next market crash. With hindsight it’s easy to do this, but in all honesty very few people anticipated the last crash before it happened.
What matters is building my ark, or in my case, building a solid portfolio of stocks. This helps me to overcome crises and boost my returns in a couple of ways. Firstly, not overly focusing on when the next crash is coming allows me to spend more time looking for stocks that can make good gains in the meantime. Secondly, building a strong portfolio now will help me in the future even when a crash might occur. I will be ready and should be able to better weather that storm, rather than seeing my gains completely evaporate.
Benefiting from stock advice from Warren Buffett
Overall, there are many good quotes from Warren Buffett that I can apply to stocks and the market in general. By thinking and applying them now, I can stay ahead. Then in the years to come, I can hopefully achieve above-average returns.