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Warren Buffett has made billions picking stocks over the course of his life.
But these days, he says, the market is changing. Instead of investors focusing on long-term returns, speculative trading is becoming predominant.
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Despite the major indices hitting record highs, Buffett, in an interview with CNBC, aimed criticism at retail investors who chase the hot stock of the moment and one-day options trading, likening it to gambling (1).
“There are times when opportunities are just thrown at you so fast you can’t, you know, it’s unbelievable,” Buffett said. “And then there’s other times when you’re very, very lucky if you find one thing in a couple of years. And it should always be that the, the latter is what prevails. But since humans love to gamble so much, there’s more money in, in actually cultivating gamblers than there are cultivating investors.”
Quick turns versus long looks
Buffett has long been an advocate of the buy-and-hold philosophy when it comes to stocks. Find a company with good fundamentals that are undervalued and buy into it, he has advocated, then wait for it (and, when applicable, help it) grow into the powerhouse you believe it can be.
Another cardinal rule: Don’t invest in an industry or business you don’t thoroughly understand. That approach led Berkshire Hathaway to grow to a $1 trillion business.
That’s a different approach than many investors today, particularly individuals who tend to follow the herd, buying shares of the hot stock of the moment (i.e. SpaceX, Micron or GameStop). Many of those investors lose money.
Perhaps partly because of this, Buffett, in the past, has called the stock market “a church with a casino attached.”
Against the tide
While some investors might shrug off Buffett’s warning, it wouldn’t be the first time his warning has gone unheeded.
During the run-up in tech stocks, as Internet firms saw explosive growth in the late 90s, Buffett refused to invest in them, which made many critics write him off (2).
