I think there are some great FTSE 100 shares out there. And I can always use a bit of expert advice to help me find them.
Since Warren Buffett took control at investing firm Berkshire Hathaway in 1965, he’s managed an average annual return of 20% for his shareholders.
He’s made himself, and a few of his investors, into billionaires in the process.
I doubt any of these morsels of wisdom will be new to any readers, but they all seem apt right now. So I make no apologies if you’ve heard them before.
#1. 10 years
If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.
We’ve had some awful times in the past five years, never mind 10. Global pandemic, stock market crash, war in Ukraine, horrors in the Middle East…
Investors have bought, sold, panicked, and stressed out in all sorts of ways. And I can really understand why people worried about stocks they thought might not make it through the next year, never mind 10.
But something struck me the other day. What if, 10 years ago, I’d set up some sort of automated transfer into a Stocks and Shares ISA, and left instructions on what to buy.
And then I went off to live as a hermit in a cave for a decade.
Coming back, if I’d managed to achieve average ISA returns, I could have made 9.6% a year. Without the faintest idea of what’s been going on.
#2. Weigh or vote?
“In the short run, the market is a voting machine but in the long run it is a weighing machine.”
Buffett was quoting Ben Graham when he said that, but it still counts for me.
This one ties in with the turmoil of the past few years too. But it might not be clear what it actually means.
To put it into recent context, we can look at the way investors responded to events of the past few years.
Much of it was led by sentiment, by fear, and by folllowing others. And I won’t knock that. When things are so uncertain that rational valuations lose all meaning, people need different directions.
And that’s the voting part. When things calm, we get back to weighing the long-term fundamentals of stocks. And we are getting back to normal, aren’t we?
#3. Tubs or spoons
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.
There’s one good result of the past few years of turmoil that I can see. There are a lot of cheap shares out there. Low valuations, high dividends, and good forecasts for future earnings.
Right now, for example, I think a lot of financial stocks are very cheap. Stocks related to property could do well too, when mortgage rates fall and the market gets back to long-term growth.
So as well as only buying stocks I want to hold for 10 years, and weighing up their long-term valuations, I intend to buy as many shares as I can.
I don’t know how much I’ll be able to stash away during the year. But every penny of what I have will be going into shares I think are cheap.
