Billionaire Warren Buffett appealed to investors not to borrow money to buy shares. It was delivered by Warren Buffett in his annual paper to Berkshire Hathaway shareholders who released on Saturday last week.
"Berkshire itself has several real-life examples of how its short-run stock movements obscure its long-term value growth.For the past 53 years, the company has built value by re-investing its earnings and allowing compound interest to work.At this year, we are moving forward, but Berkshire has decreased four times, "said Buffett, Tuesday (27/2/2018).
Data show Berkshire Hathaway shares fell between 37-59 percent in the last 50 years. In 1973-1975, Berkshire Hathaway shares had weakened 59 percent. Then 1987, Berkshire Hathaway shares shrank 37 percent, from 1998 to 2000 stocks fell 49 percent, and 2008-2009 slumped 51 percent.
"It offers the strongest argument I can muster to not use borrowed money to own shares, no one knows how far stocks can fall in a short time," he wrote.
He adds that even if the loan is small and your position is not immediately threatened with a stock market that is sluggish, you still think about the condition plus worrying news.
"Uneasy thoughts will not make good decisions," he wrote.
Buffett estimates, Berkshire Hathaway stock potentially back down similar. "No one can tell you when this will happen, the light can change at any time," he said.
Warren Buffett also rejects the belief that bonds or bonds are low-risk investments in the long run. He recommends keeping investments in stocks as it is resistant to the negative impact of inflation.
"I want to immediately acknowledge that stocks will become more risky, much more risky than US bonds in the short term.Because the horizon of investors for long-term investment, but diversified portfolio longer, diversified portfolio of US stocks less risky than bonds ," he said.
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