Warren Buffett on the Stock Market

Brian Hicks

Updated May 7, 2013

If anyone should have a strong handle on where the stock market is going, it’s Warren Buffett.

The well-known billionaire investor has a strong track record for making smart financial decisions, and his opinions on today’s stock market are helping to ease the fears that many have over whether or not stocks are likely to keep improving.

warren buffettIn Buffett’s eyes, the future of stocks is looking quite promising. Buffett predicts stocks will go “far higher” over time, as he said in an interview with CNBC.

“People pay way too much attention to the short term,” says Buffett, highlighting the notion that stocks could potentially see a pullback at any time. But it would not likely indicate an actual fall in a long-term scenario, he says, even if it were to last for some time.

In addition to making overall claims about the future health of the stock market, Buffett clarified his take on bonds, calling them a “terrible investment,” and stating that they are “priced artificially” high at the moment.

Because of the Fed’s asset buying initiative, interest rates could inevitably rise in either the near or long-term, which would likely cause investors who put emphasis on bonds to lose money.

Staying Smart

It’s important to take a closer look at the types of investments that Buffett favors at the moment.

Instead of bonds, Buffett is saying that equities are without a doubt the way to go in today’s economy. In his eyes, however, waiting for stocks to hit milestones (such as passing the Dow 15,000) isn’t necessarily the best way to approach purchasing stocks.

Instead, investors should be waiting to hit these milestones on their way down. It’s an important distinction that no one should ever ignore, especially those who are concerned with hitting stocks at their lowest possible prices.

According to Buffett, stocks across the board are generally “priced fairly” at the moment, even if they aren’t as reasonable as they were a few years back.

Warren Buffett’s major philosophy is all about making smart financial decisions and avoiding those which might cause one to have regrets about the past. One thing that Buffett was quick to point out in his interview with CNBC’s Becky Quick is that one of the worst decisions a person can make is allocating funds towards risky investments.

Buffett calls it “crazy” to allow the potential of making a great deal of money quickly to influence a decision, as these decisions tend to backfire. Instead, he favors stable, reliable investments to those which offer something too good to be true.

Bucking the Trends

No matter how much respect one might have for someone such as Buffett, it can be difficult to ignore the fact that his recommendations are in slight contrast to those made by other analysts in recent times. Some have been quick to call bonds worthwhile, even if others remain hesitant.

For Buffett, however, bonds are not worth purchasing at the moment—at least as far as “regular investors” go. The billionaire has himself owned bonds in the past, although he attributes these purchases to special-case scenarios.

Because of the Fed’s asset buying program, some analysts believe that now is the time to buy bonds, perhaps even over equities. As Buffett has stated, however, an increase in interest rates (which will inevitably happen) could have a dramatic affect on the world of bonds, and this would cause many investors who sunk their cash into bonds to lose money in the long-run.

With equities, however, this scenario isn’t nearly as much of a problem, although Buffett and other well-known investors are always quick to note that no investment is smart unless it is sound; risks should be avoided whenever possible.

The global economy has been in a state of unrest as of late, with America finally making strides to put the dollar in a more favorable spot—especially in comparison to how the Eurozone is faring.

Because of the flux in which the country (and the world in general) finds itself, now is a crucial time for the stock market, for better or for worse. Only time will tell whether or not Buffett’s predictions will hold their ground, but it’s good news for investors who favor equities over bonds.


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