When Warren Buffet Talks….

by Galia Gichon on October 31, 2008

Is he a sage? I don’t know but his recent Op-Ed in the New York Times resonated with me.  I have to admit, the barrage of news regarding the economy is getting to me.  I can not get away from it and it is seeping into other areas.  A friend recently shared that they could not go out for dinner because of the economy.  While they do not have to go out to the trendiest place, we still need to live our life.  What about Chinese or a less expensive option.  We should not put our lives on hold and become paralyzed.  However, what can we do? I recently read an Op-Ed in the New York Times written by Warren Buffet.  I read it once and walked away with actions steps I can do right away.  Here are my takeaway points:

1) Buy American stocks.  Chances are the market will move higher well before the economy turns up.  So if you are buying stocks now, you are buying at the low.  After the Depression, the market advanced 30% even though economic conditions were terrible.  Same in the early 1980’s: inflation raged and the economy was in the dumps but stocks increased.  I will add, that you should stick to mutual funds and invest for the long term.

2) “Equities will almost certainly outperform cash over the next decade.”  I will add: If you are holding a good amount of ca.sh, have enough in your emergency savings account and do not need it for the long run, consider investing a portion.  Perhaps this is the time to put it in your IRA or your child’s college savings account. 

3) Buffet’s simple rule: “Be fearful when others are greedy and be greedy when others are fearful.”  When you are wondering what to do, stop for a minute and read this quote.  Keep doing it until you feel calmer.

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