Investment basics

Warren Buffett: Don’t try to time the market

Warren BuffettThe Oracle of Omaha warns against an incredibly common amateur investors mistake: You shouldn’t try to time the market.

Warren Buffett is widely considered the most successful investor of the 20th century. He is noted for his adherence to the value investing.

Value investing generally involves buying securities that appear under priced by some form of fundamental analysis. According to Buffett, the essence of value investing is buying stocks at less than their intrinsic value.  The intrinsic value is the discounted value of all future distributions.

Buffett truly believes in stocks. ”The nice thing about investing in stocks is that, over time, equities are going to do well,” Buffett tells USA Today. However, to really profit from stocks and build wealth over time, individual investors must avoid making costly mistake.

One big mistake is to time the market.

”People that think they can predict the short-term movement of the stock market — or listen to other people who talk about (timing the market) — they are making a big mistake,” says Buffett.

Buffett says also, that investors should not try to mimic high-frequency traders. Instead, Buying stock in a good business and hanging on for the long term is a better strategy.

Buffett warns investors on too high expenses: there’s no reason to pay an expensive management fee to invest in a mutual fund when super-low-cost index funds that mimic large indexes like the Standard & Poor’s 500-stock index are available.


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