Weekly Buzz: As Buffett steps down, his principles carry on ⏳

5 minute read

After six decades as Berkshire Hathaway's CEO, Warren Buffett, the 94-year-old investing legend who turned a struggling textile mill into a $1.1 trillion behemoth, is finally hanging up his hat.

While market watchers fretted over tariffs, Buffett stayed cool through global meltdowns that make today's trade war look like a kindergarten spat. During his tenure, he navigated the risk of nuclear annihilation during the Cold War, weathered the Vietnam War and the Gulf War, and witnessed the collapse of the Soviet Union. Through it all, Buffett kept buying and holding.

The result? As Barron's noted, Berkshire stock could fall 99% and still have outperformed the S&P 500 – that’s possible because Berkshire’s stock has increased 19.9% a year since 1965, compared to the S&P’s 10.4% annual return (with dividends reinvested). More than that, his plain-spoken wisdom has influenced generations of investors worldwide.

The Oracle of Omaha’s legacy

“Time is the friend of the wonderful company.” Buffett's approach to holding quality companies "forever" has allowed compounding to work its magic. His biggest winners weren't quick trades but businesses he’s held for decades, allowing their intrinsic value to materialise.

When Buffett finds businesses with strong competitive advantages, he's content to let time work in his favour. Coca-Cola, which Buffett began purchasing in 1988 and still holds today, has returned 7290%, including dividends

“Be fearful when others are greedy, and greedy when others are fearful.” Throughout Buffett's tenure, he's navigated through over 30 market corrections and 10 bear markets, including 1987’s Black Monday, the dot-com bubble burst, and the COVID-19 plunge.

While others retreated during the 2008 financial crisis, Buffett deployed capital – including a US$5 billion investment in Goldman Sachs. Going against the crowd is easier said than done, but it's been central to Buffett's success.

“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” This quote, from his mentor Benjamin Graham, captures an important point: day-to-day prices reflect investor sentiment, while long-term returns reflect actual business performance.

Rather than short-term market moves (the "voting"), Buffett looks at long-term fundamentals, like a firm’s revenues and profits (the "weighing"). When the dot-com bubble sent valuations soaring, he stayed away from speculation – by 2002, when market euphoria gave way to economic reality, Buffett's focus on value proved prescient.

What's the takeaway here?

Buffett's retirement marks the end of a chapter in investing history, but his principles aren't retiring with him. For those who don't have the time to analyse individual companies like Buffett does, he recommends low-cost index funds to gain broad exposure, without trying to pick winners and losers.

Our General Investing portfolios take that a step further by investing in multiple funds that cover a range of asset classes – stocks, bonds, commodities – and regions around the world. What you end up with is a portfolio that captures long-term market growth with layers of global diversification.

📰 In Other News: The Fed holds rates steady amid a cloudy outlook

The US Federal Reserve left interest rates unchanged in the 4.25-4.50% range at its meeting this week. Chair Powell didn't mince words about the challenge they're facing: tariffs have added to both inflation and unemployment risks, yet it's still unclear how things will unfold.

This holding pattern will continue for the time being as economic signals remain mixed. April's labour report exceeded expectations with 177,000 new jobs – suggesting economic resilience. Yet the last quarter saw US GDP dip – partly because businesses rushed to stockpile imports ahead of tariffs. Traders are anticipating an interest rate cut by July, with three cuts in total predicted by year-end.

This article was written in collaboration with Finimize.

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