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Did I Just Miss A Bull Run? Warren Buffett Answers

Stock markets around the world have been on the rise lately.

In the US, the market barometer, the Dow Jones Industrial Average, climbed above the 20,000 mark for the first time ever in January. At home, the SPDR STI ETF (SGX: ES3) – a proxy for Singapore’s market barometer, the Straits Times Index (SGX: ^STI) – has risen almost 22% since hitting a low in mid-February last year.

The upward momentum may prompt some to see a “bull run” happening. But investors who have missed the ride up may be asking: Is it too late to join now? Should we wait for a pullback?

The Oracle of Omaha speaks

This question was posed to Warren Buffett in an interview yesterday. Here’s what the Oracle of Omaha said about guessing when the next pullback will happen:

“Well, I would say they don’t know, and I don’t know.

And if there’s a game it’s very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it– is a terrible mistake. I don’t know anybody that can time markets over the years. A lot of people thought they can.”

In short, Buffett – one of the wealthiest men in the world and a person with a track record of 60-plus years of investing excellence – does not know when the market will pullback. And, he went on to say that nobody is able to successfully time the market over the years. In fact, Buffett feels that the investor’s time is better spent elsewhere.

Using the example of a farm, he explained:

“But, if you were buying a farm and you decided that farms were gonna be worth more money ten, or 20, or 30 years from now and that would be a productive asset, go out and buy it unless it was just … some absurd price.”

Instead of fretting over the next downturn, Buffett believes that investors should focus on finding companies that have the potential to be worth more over the next decade or longer. To make a point, Buffett also revealed that he has spent US$20 billion on stock purchases since the US presidential elections ended in November – he is putting money where his mouth is.

Diversifying over time

To be sure, Buffett is not advocating that investors should invest all their capital at one point in time and then hope for the best. He explained:

“You wanna spread the risk as far as the specific companies you’re in by owning a diversified group, and you diversify over time by buying this month, next month, the year after, the year after, the year after.”

This is important – diversifying over time helps lower risks for investors too.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.