Warren Buffett: How you should invest in 2022
Let me introduce to you Mr. Warren Buffett, an iconic investor. His success dates as far back as 1965, having made substantial earnings by purchasing and owning Berkshire Hathaway, which has averaged 20% earnings per year ever since.
His success has come with a set of straightforward rules to follow. It starts at: 0.36
THE BUFFETT / MUNGER APPROACH
Understand the Business.
Durable competitive advantage.
Management integrity and talent.
Ensure a margin of safety. (Price that makes sense)
Yes, my fellow investors, it's a straightforward 4 step approach.
We now factor in today's challenges
INVESTING CHALLENGES IN 2022.
Let's go over Warren Buffets' advice for 2022 by factoring in today's challenges.
- Over-evaluated stock market.
It starts at 2:11
The key is not to buy overpriced stocks. The key is you wait. "You don't make money when you buy, and you don't make money when you sell. You make money when you wait." (Charlie Munger) For the right opportunities to come along.
- Active investors need to be patient.
- Passive investors need to continue normally for the stock market in time will rise. 4.24 Click the time for a more in-depth analysis.
Warren also states that "3 wonderful businesses is more than you need in this life to do very well."
Inflation is on the rise.
It starts at: 7.10
Warren explained back in 1982 that Business must have two characteristics in an inflation market before investing, and these remain the same today.
An ability to increase prices relatively quickly (even when product demand is flat and capacity is not fully utilized) without fear of significant loss of either market share or unit volume, and Example. Appel, Coca-Cola.
An ability to accommodate significant dollar volume increases in Business (often produced more by inflation than by real growth) with minor additional capital investments. Example. Facebook.
Interest rate hikes due to inflation.
Starts at 10.52
- The lower the interest rate, the easier it is for valuations to rise.
- The higher the interest rate, the harder it is for valuations to rise.
Keeping this in mind, this is a possibility for 2022 / 2023. Valuations may come under pressure if interest rates rise, as some money will flow out of stocks and back into bonds.
Remember how you want to invest is entirely up to you, but keep in mind the four rules and happy investing, my fellow stock friends.