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Warren Buffett is the world's most famous investor. At 89 years old, he's weathered the GFC, the dot.com bubble, the early 1990s oil price shock, and stock market crashes in the 1970s and 1980s. He has faced uncertainty head on and turned it into a $72 billion fortune.
Uncertainty abounds right now as the struggle against coronavirus wears on the world economy. To help guide you through these uncertain times, we take a look at Warren Buffett's advice for managing uncertainty.
"If you aren't thinking about owning a stock for 10 years, don't even think about owning it for 10 minutes"
Current events will pass, but in the long term, quality businesses tend to survive. When you're investing in the share market, you need to have a long-term time horizon. Share prices can fluctuate from day to day and month to month. Over the long term, companies that are able to deliver consistent and growing profits will tend to perform well. But that doesn't mean there won't be setbacks and hurdles to overcome.
"Price is what you pay. Value is what you get"
Buffett is emphasising that price and value are not always the same thing. Usually they are linked, but sometimes price does not accurately reflect value. This can be the case when share markets are volatile – share prices may over or underestimate the value of the underlying business. Value investors like Buffett look for shares that are trading below their intrinsic value in the belief that the price will eventually revert to accurately reflect value.
"Be fearful when others are greedy and greedy when others are fearful"
Buffett made some of his best investments during market downturns. Using his value investing philosophy, he pounced on opportunities when markets were in the red. With this quote, Buffett is warning against being caught up when markets are peaking, but to ensure your eyes are open to opportunity when markets fall. This makes good sense. After all, an investor who bought $10,000 worth of Afterpay Ltd (ASX: APT) shares at their March low of $8.90 would be sitting on $83,000 now.
