Warren Buffett’s Ultimate 3-Step Strategy: Go Ahead and Invest, Then Observe, Before Deciding.
As a result of this strategy, Berkshire Hathaway is a success story valued at over $680 billion today.
Warren Buffet's success in the stock market commands respect. Many people have achieved great success in a short period in the history of the stock market, but very few can boast of having been successful for more than 60 years like Warren Buffett.
This is what has allowed Warren Buffett to make the early shareholders of Berkshire Hathaway ultra-rich, while still being one of the richest men in the world with a fortune of over $111 billion as of this writing.
That's a lot of money for someone who hasn't created any products or services that everyone wants to buy. Warren Buffett's fortune was built through smart investments and patience.
To people who ask him the secrets of his success in the stock market, Warren Buffett explains that there is nothing extraordinary and that it is a skill “you can learn in the fourth grade”, even if it's “not taught in schools”.
Warren Buffett's strategy is simple and brilliant, but most people ignore it by getting lost in the complexity
At the 2022 Berkshire Hathaway's annual shareholders meeting, Warren Buffett once again reiterated his ultimate strategy for generating profits in the stock market. First and foremost, Buffett made it clear that he and his longtime partner Charlie Munger are not psychics:
“We haven’t the faintest idea what the stock market is going to do when it opens on Monday. We’ve not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money.”
Warren Buffet is not looking for hypothetical perfection. He is intelligent and clear-sighted enough to know that it is only a utopia. Instead, Warren Buffett applies a 3-step strategy:
Go ahead and Invest.
Observe the Stock Market over time.
See if you should buy more of that company’s stock or sell it.
This relatively simple pattern has proven effective over the years for Berkshire Hathaway. It simply takes the pressure off of yourself to predict the future of the stock market.
The two times Warren Buffett tried to exit this strategy, he lost billions of dollars
For Warren Buffett, it is obvious that time in the market always beats timing the market.
However, like everyone else, Warren Buffett makes mistakes. The two times he tried to go against this golden rule, he lost money:
“We were optimistic in 2008 when everybody was down on stocks. We spent a big percentage of our net worth at a very dumb time. We spent about $15 or $16 billion, which was a lot bigger to us then than it is now.”
The same mistake was repeated in March 2020 just before the COVID-19 pandemic. This once again confirmed Warren Buffett in his historical strategy. You can't change a winning recipe. And with a market cap of more than 680 billion dollars as I write these lines, we can say that Warren Buffett has found the right recipe with Berkshire Hathaway.
Elon Musk shares a philosophy close to Warren Buffett's when it comes to the stock market
The funny thing is that despite their generational differences, Warren Buffett and Elon Musk share much of the same philosophy on the stock market. Indeed, Elon Musk recently explained in a tweet his strategy with the stock market. A strategy in 3 fundamental points:
Buy stock in several companies that make products & services that *you* believe in.
Only sell if you think their products & services are trending worse. Don’t panic when the market does.
Be patient.
This should help you take action. No one is perfect and no one can predict the future in the short term. However, if you choose companies that you fundamentally believe in and are willing to be patient long enough, then your chances of making big profits will be maximized.
Warren Buffett and Elon Musk are perfect examples. There's no need to be complicated when you can take inspiration from two brilliant investors like them.