By now it’s pretty apparent that it’s not a question of if, but when America might enter a recession.
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On April 7, New York Times columnist Jeff Sommer wrote that the odds of a financial slowdown over the course of the next year are “fairly high.” Financial advisor and former White House director of communications Anthony Scaramucci told News Nation the U.S. is “on track” for a recession, though he believes it will be a milder event than in 2008. Further, the latest jobs report, coming in below expectations, is a sign that the job market is entering a cooldown, per CNN. A recession may be inevitable.
At times like these, many people seek out the advice of a financial pro — and one of the most prominent experts may be Warren Buffett. One of the world’s wealthiest people — worth an estimated $93.4 billion as of 2022, as GOBankingRates reported — Buffett must be doing something right, and he has offered a number of tips concerning investment during a recession.
Focus on Long-Term Investment Rather Than the Immediate Future
Like many other financial gurus such as Suze Orman and Dave Ramsey, Buffett said that it’s key to consider long-term market investments rather than worry about potential dip in the near future. As CNBC reported, Buffett “recommended against obsessing over finding a perfect time to buy a stock.” Rather, he advised to “go ahead and invest, and then observe the stock market over time to see if you should buy more of that company’s stock or sell it.” He is also famous for having said, “If you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.”
Buy More Stocks During a Recession
A recession and low market may present a buying opportunity. Per CNBC, Buffett and his associates have used this strategy as it offers a higher chance of return, because “If the value of a stock dips after you buy it, that means its shares have become less expensive — so buy more of them.” As Harvard Business Review noted of Buffett, “He likes to buy stocks at bargain-basement prices and hold them patiently.” Warren once told his shareholders, “This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.”
Focus on Solid Businesses and Fundamentals Rather That Fad Stocks
One tactic that has proven fruitful for Buffett is choosing not to rely on “fad” stocks, or those performing well out of nowhere, but rather choosing investments based on overall business performance. It’s logical that a business that has a solid foundation and continued trajectory will be more stable and able to overcome any downturns in the market. In a letter to Berkshire Hathaway shareholders in 2021, Buffett shared: “We own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves… [We] are not stock-pickers; we are business-pickers.” Per Harvard Business Review, Warren often follows his own advice. “When he invests in a company, he likes to read all of its annual reports going back as far as he can. He looks at how the company has progressed and what its strategy is.”
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