Is Now a Good Time to Invest? Here's What Warren Buffett Just Said.
Key Points
With the S&P 500 in its fourth year of delivering positive gains, it might be time to be fearful.
It's important to keep investing in the stock market to benefit from compounding over time.
When the stock market rises to highs, be on the lookout for bargains.
The S&P 500 (SNPINDEX: ^GSPC) is hitting new highs again this week. Although there have been some ups and downs this year, including a serious dip at the end of March, the market has been in strong bull territory for almost four years. It has gained double-digits for the past three years, and it's in the positive for the fourth year in a row.
That's the power of investing in the stock market. Even if you invest in a passive index fund that tracks the S&P 500, you can benefit from the magic of a strong market that compounds over time.mThat might make you think now is a great time to buy stocks. But is it? Here's what investing legend Warren Buffett thinks.
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It's not the ideal time
Many investors, especially those who follow Warren Buffett, know that he tends to be greedy when others are fearful and fearful when others are greedy. He has said similar things several times in different ways, explaining that high prices are a recipe for a correction, and low prices make it possible to buy in and get the greatest gains. Since that's his business, he welcomes those opportunities.
As the S&P 500 hits new highs, it shouldn't be surprising that Buffett doesn't see tons of great investment opportunities. "It isn't our ideal surrounding area -- or environment, I should say -- in terms of deploying cash for Berkshire," he said in an interview at the Berkshire Hathaway meeting last week.
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For an investor known to be risk-averse, Buffett actually takes on the risks that other investors are too nervous to; it can feel quite scary to invest when stocks are down and pundits are talking negatively about the economy and the markets. It takes a really optimistic view of the future to jump in when everyone else is bailing, and Buffett takes a sunny view of the long-term potential for the U.S. economy.
He frequently waxes nostalgic about the opportunities he's had in America that he wouldn't have elsewhere, and he sees that continuing for the foreseeable future. "Never bet against America," he said in the 2020 annual letter, accent his.
Don't wait for the ideal time
Given that lead-up, you might think Buffett would recommend sitting out right now. But that couldn't be further from his approach. He always finds what to buy, even though the Berkshire Hathaway cash horde continues to grow.
The right approach isn't to sit this out or to sell. Investors should stay in the markets and keep investing. Although Berkshire Hathaway hasn't released its latest 13F filing, which reports its trades for the first quarter, it has continued to buy stocks every single quarter over the past two years, even as it remains a net seller of stocks and its cash holdings continue to grow.
When the market is at a high, what's important is to be choosy. Find the bargains and stay in the market, and be prepared for the next correction.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
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