3 Summer Investing Moves Warren Buffett Would Make
According to a recent Empower survey, 86% of Americans admitted they were investing with specific financial goals in mind, such as retiring at the right time (40%) or becoming financially independent (36%). However, only 44% of respondents felt confident in their ability to make wise investment decisions. Knowing how to invest your funds for the future can be a confusing process with the abundance of information out there.
If you’re uncertain about how you should be investing during the summer months, you could apply some tips from Warren Buffett and his investment principles. Here are a few specific actionable moves for the summer season worth considering.
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Move No. 1: Hold Investments Even When Tempted To Sell
“The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
Steven Menotti, a former personal banker and CEO of Menotti Enterprise, noted that clients tend to make investing mistakes during these months since most investing advice doesn’t account for summer. He elaborated on past mistakes he observed, explaining that “clients became impatient, traded out of boredom, and gave back their gains, just as Buffett cautions against in half of his shareholder letters.”
Buffett is known for his quote above explaining that the stock market is a mechanism for transferring money from the impatient to the patient. Unfortunately, summer is the time of year when impatience is greatest, as people are off work and have free time on their hands.
Menotti stressed that when markets are silent and investors get bored, it can be tempting to sell. He has witnessed investors sell decent stocks because they wanted to keep themselves occupied, only to end up buying them again for a much higher price in September. The best move you can make that Buffett would approve of is to remain patient and stick to your investments during this time.
Move No. 2: Track Companies You Want To Invest In
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett
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Menotti believes Buffett would make a list of companies he wants to invest in and start tracking them over the summer months. Since Buffett is a proponent of fundamentals over headlines, he would take the time to review financials and look out for any potential deals. He definitely wouldn’t buy or sell based on a slow summer period.
“Choose five companies you already know, determine the price you would be willing to pay for each company, and write it down before you go on vacation,” remarked Menotti. You can use your free time reading about the companies you want to invest in so you don’t make a rash decision out of boredom.
Menotti also emphasized that preset targets remove the emotion from a dip, since you set your price when you were not emotional. If you believe in a company, then you don’t have to stress about trying to time the market.
Move No. 3: Decide What You’ll Invest In
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” – Warren Buffett
Once you’ve taken the time to review companies and industries that you want to invest in, you can make a list of all of the stocks you plan on purchasing when you have the funds. There’s no benefit in rushing a stock sale or purchase just because you’re bored during the summer months. Buffett would approve of making a proper plan before your buying spree.
For example, Buffett invested $5 billion in preferred stock of Goldman Sachs through Berkshire Hathaway during the financial crisis of 2008. Three years later, Goldman redeemed the shares, earning Berkshire a profit of $3.7 billion. Not only was Buffett investing in a company he believed in, but he was also following another one of his core tenets: “Be fearful when others are greedy and greedy when others are fearful.”
Menotti concluded, “Based on what I’ve witnessed, the best strategy was to do nothing between June and August, as it outperformed nearly all the active moves my clients made.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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