We’ve experienced large amounts of volatility in 2023. And as we head towards 2024, I need some inspiration. Who else is there to look to but Warren Buffett?
In his eight decades of investing, the fabled investor has provided some magnificent advice. During his time, the ‘Oracle of Omaha’ has built a fortune comfortably over $100bn. He started his investing journey with a small sum at the age of just 11.
Under his leadership, Berkshire Hathaway, a former textiles company he originally invested in back in the 1962, has experienced major growth. Since then, its stock has returned around 20% per year on average. Now that’s impressive.
I’m hoping to take some of his wisdom and apply it to my portfolio. Here are three lessons I’ll be taking into 2024.
Remembering my goal
Firstly, I’ll be remembering why I invest. And that’s for long-term gains. I suspect there will be ample talk surrounding the stock market in 2024. We’re coming through a choppy few years. Interest rates remain high. And there are other factors to throw into the mix as well, such as a UK general election. All of that combined could create a cocktail of volatility.
However, I won’t be worried about this. As Buffett once said: “If you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes”. The stock market has proven time and time again that investing for the long run is the best way to reap its rewards. Buffett has adopted this approach with a number of his investments. It’s safe to say that it paid off.
Being greedy
With that said, I’ll also be looking for opportunities in the market. He once said it’s good to “be greedy when others are fearful”. And with the volatility we may see in 2024, I think it’ll be a smart time to put that into action.
What he essentially means when he says this is to capitalise on opportunities that other investors are passing on. The current economic environment has seen plenty of investors exit their positions in stocks in favour of cash. I expect this to continue. But that suits me. It means I can buy quality companies for cheaper prices.
I’ve put this into action this year, using it as a chance to load up on some cheap shares. For example, with a price-to-earnings (P/E) ratio of just four, earlier this year I purchased some Barclays shares. With a P/E ratio of around six, I’ve also added to my position in Lloyds.
The power of compounding
Finally, I’ll be staying consistent with my investing. I’ve made it a habit to put some money aside at the end of every month to go towards my investing goals. And I’ll continue to do this in 2024.
By doing so, I can benefit from compounding, which means I’ll be earning interest on both my original investments and on my returns. This will allow me to build my pot faster. Buffett has on numerous occasions pinpointed it as one of the main reasons for his wealth accumulation.
I’m ready
What 2024 has in store for us is unknown. But by taking this advice, I’m confident I’ll be able to navigate the market.
