1 Important Lesson From Warren Buffett’s 2017 Annual Shareholders’ Meeting

Warren Buffett and his long-time business partner Charlie Munger typically hold their annual company’s annual shareholders’ meeting in early May each year. The meetings tend to draw massive crowds due to the business, investing, and life lessons that Buffett and Munger often dispense. In recent years, the number of attendees have risen to around 40,000.

This year’s meeting was held last week on 6 May 2017. Let’s look at one important lesson shared in the recent meeting.

Lesson on speculation

Buffett has always opposed speculation and is a firm believer of long-term investing in stocks. During the meeting, he described how people are drawn to speculation in the markets:

“Markets have a casino characteristic that has a lot of appeal to people, particularly when they see people getting rich around them. And those who haven’t been through cycles before are probably a little more prone to speculate than people who have experienced the outcome of wild speculations…

…When speculation gets rampant and when you’re getting what I guess Charlie would call ‘social proof’ that it has worked recently, people can get very excited about speculating in markets. And, we will have it from time-to-time in the market.”

Buffett joked that it’s painful to watch your neighbour, “who you think has an IQ 30 points below you, getting richer than you are by buying stocks, whether it’s internet stocks or whatever.” This drew laughter from the crowd.

He gave a piece of advice on how not to succumb to the follies of the market and be steadfast. He mentioned (emphasis is mine):

“There will be more opportunities for investors if they can keep their wits about them.

Fear spreads like you cannot believe until you’ve seen a few examples of it. The way the public can react is really extreme in markets and that actually offers opportunities for investors.”

Some of the best opportunities to invest over the past decade actually surfaced during the 2007-2009 great financial crisis – that was a period of huge market volatility. Those who had purchased stocks during the financial crisis would likely be sitting on huge gains now. Today, the Straits Times Index (SGX: ^STI) has actually more than doubled from its financial crisis low. As Buffett said, we just have to keep our wits when people are terrified and dumping stocks in futility during market shocks.

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