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According to Warren Buffett, true investment involves committing capital with a long-term goal of generating returns from an asset. He maintains that investing is not about chasing trends or pursuing short-term gains
Warren Buffet believes that giving time to the market is superior to timing the market. (Representative/Shutterstock)
Warren Buffett, one of the world’s greatest investors, has recently issued a stark warning. According to him, 40 per cent of Gen Z’s wealth has almost vanished due to the recent market decline. This situation has arisen, he suggests, because young investors are making a serious mistake.
Buffett asserts that the challenge lies not in investing itself, but in the approach taken towards it. He highlights that a similar error occurred during the dot-com bubble, when inexperienced investors failed to grasp the distinction between speculating and investing. For context, Gen Z encompasses individuals born between 1997 and 2012.
According to Buffett, betting occurs when individuals invest money solely in the hope that someone else will purchase it from them at an elevated price. The emergence of commission-free trading apps has transformed investing into a game-like activity.
Gen Z investors trade 25 per cent more than average investors. The main reason for this is “the obsession with getting rich quickly”, he said. However, Warren Buffett warns that this is not investment, but gambling. And in gambling, the house always wins.
According to Warren Buffett, real investment lies in investing capital with the long-term objective of earning returns from an asset. It deviates from chasing trends or seeking short-term gains; instead, it embodies becoming a business owner.
Buffett believes that, along with choosing the right companies, patience is essential. His favoured holding period is “forever”. He advocates for this approach because he believes that giving time to the market is superior to timing the market.
From 1965 to 2020, Berkshire Hathaway’s book value achieved an annual growth rate of 19 per cent, while the S&P 500 delivered a return of only 10.2 per cent. Buffett stated that the new generation should consider adopting a similar strategy. According to him, investment should begin with index funds, such as low-cost S&P 500 funds. Additionally, all dividends should be reinvested, and investments should be automated. “The more you trade, the less you will earn,” he said. This is the fundamental rule for generating wealth in the stock market.
Buffett’s lifestyle also reflects his investment principles. For example, he still lives in the same house he bought in 1958 for $31,500. At the time, $100 was about Rs 500, which means Buffett bought his house for approximately Rs 1,50,000. He is also known for his frugal habits, such as eating breakfast at McDonald’s with coupons. Buffett believes that the best investment is in oneself, and that requires capital. Therefore, he always keeps his expenses under control.
Another important principle of Buffett’s investment strategy is his emphasis on knowledge acquisition. He dedicates 80 per cent of his day to reading, prioritising a deep understanding of businesses over short-term market fluctuations. Buffett believes that investment decisions should not be driven by trends but by a thorough comprehension of the underlying business. He advocates for investments that inspire confidence even in a hypothetical scenario where the market remains closed for a decade.
Buffett maintains that earning money does not mean becoming rich quickly, but rather avoiding becoming poor slowly. This mantra is a key element that makes Buffett’s investment philosophy timeless.
In the Indian context, this principle carries even greater weight. India possesses a substantial youth population who are increasingly engaging in investment opportunities. Trends such as cryptocurrency, penny stocks, and intraday trading have captivated their attention. However, Buffett’s advice remains relevant: steer clear of such volatile instruments and prioritise long-term investment strategies. Investing in index funds and blue-chip companies presents a potentially secure and prudent option within the Indian market as well.
Buffett’s message is clear: investing is a marathon, not a sprint. It requires patience, discipline, and knowledge. If Gen Z adopts this philosophy, they can not only regain their lost wealth but also create a secure and prosperous future.
