Warren Buffett’s top tips for investors in 2022: What the legendary investor said to Berkshire shareholders

Berkshire Hathaway shareholders flocked to Omaha, Nebraska over the weekend to hear from legendary investor Warren Buffett and his sidekick Charlie Munger, as well as other company executives. It was the conglomerate’s first in-person meeting since 2019 and tens of thousands of shareholders came to hear what the company’s 91-year old chairman and CEO had to say about business, the economy and investing.

Berkshire’s vast business touches many different areas of the economy including insurance, retailing, manufacturing, energy and more, making it a good gauge of the current economic landscape. The company owns dozens of different businesses including Geico, Dairy Queen, and BNSF Railway, as well as significant stakes in Apple, Bank of America, Coca-Cola and American Express.

Here are the key lessons for investors from the 2022 Berkshire Hathaway annual meeting, known as “Woodstock for Capitalists.”

6 best lessons from what Buffett said at Berkshire Hathaway’s annual meeting

1. Make sure your portfolio is built to survive

Berkshire is known for holding a large amount of cash on its balance sheet and some have criticized Buffett for not being more aggressive in making investments with that cash. But he highlighted the importance of holding enough cash to ensure that the company can always survive, especially during market panics similar to the financial crisis of 2007-2009.

“We will always have a lot of cash on hand,” Buffett said. “There have been a few times in history, and there will be more times in history, where if you don’t have it, you don’t get to play the next day.”

“It’s like oxygen,” he added. “It’s there all the time, but if it disappears for a few minutes, it’s all over.”

You can take the same approach to your own portfolio. Avoid taking positions that could cause you to realize a permanent loss or using techniques that might harm you in a crisis, such as margin trading. Having an emergency fund of cash saved can help you survive the inevitable crises in your own life.

2. Focus on value, not on timing the market

Buffett reminded shareholders that he never knows what the stock market is going to do in the short term, which is why attempting to “time the market” is a poor investment strategy. Investors who think they can jump in and out of the market at all the right times are extremely unlikely to be successful.

“We have not been good at timing,” Buffett said. “We’ve been reasonably good at figuring out when we were getting enough for our money.”

Buffett pointed out that they were too early in deploying funds during the 2008 financial crisis and said he “totally missed” the opportunity in March of 2020.

When you’re investing yourself, make sure that you’re focused on the value you’re getting from the investment, or how much you’re paying relative to what the asset will produce, and not whether you think the price will go up or down immediately.

3. Owning productive assets is the way to go

Investors have lots of choices when it comes to where they put their money. Buffett again made his preference clear: assets that produce value for their owners. There are many investments that fall into this category including stocks, bonds, real estate properties, farmland and more.

Recently, cryptocurrencies have burst onto the investment scene and attracted a lot of interest from traders and the media, but Buffett made it clear that he’s no fan.

“If you told me you owned all of the Bitcoin in the world, and you offered it to me for $25, I wouldn’t take it because what would I do with it?” Buffett said.

Owning an apartment building produces rental income and farmland produces food, Buffett said, but cryptocurrencies such as Bitcoin don’t produce anything for their owners.

“That explains the difference between productive assets and something that depends on the next guy paying you more than the last guy got,” he said.

4. Steer clear of Bitcoin and other cryptocurrencies

Buffett and Munger both made clear that their opinions on Bitcoin and cryptocurrencies have not changed since they first started warning investors about their dangers. Buffett called Bitcoin a “mirage” in 2014, but 98-year-old Munger took it a step further at this year’s meeting.

“In my life I try and avoid things that are stupid and evil and make me look bad in comparison with somebody else — and Bitcoin does all three,” Munger said.

Munger, who is known for his strong opinions, said Bitcoin is stupid because “it’s very likely to go to zero,” and it’s evil because it undermines the Federal Reserve and the national currency system. Finally, he said it makes the U.S. look bad in comparison to China because the communist country was smart to ban cryptocurrency altogether last year.

“When you have your own retirement account and your friendly advisor suggests you put all of the money into Bitcoin, just say ‘no’,” Munger added.

5. Avoid the speculative nature of the stock market

The stock market has always been a combination of legitimate investment activity and more casino-like speculation, Buffett said, but the past couple of years have leaned more toward the speculative side.

“It’s a gambling parlor,” Buffett told shareholders, adding that Wall Street had contributed to the casino mentality. “They don’t make money unless people do things…and they make a lot more money when people are gambling than when they’re investing.”

“It’s almost a mania of speculation that we now have,” Munger said. “We’ve got people that know nothing about stocks being advised by stockbrokers who know even less.”

It’s worth looking at your own portfolio and seeing if you fall more into the investment category or the gambling category of activity. If you’re a frequent trader, constantly buying and selling positions, you may be lining the pockets of someone other than yourself.

One investment option that has been recommended by Buffett in the past and will drastically reduce the fees you pay is to invest in an S&P 500 index fund. By doing so, you’ll own a diversified portfolio of American businesses and pay very little in costs in order to be invested in it.

6. Your skills can’t be taken away by inflation

With inflation at its highest level in 40 years, shareholders were wondering how to protect themselves from losing purchasing power as prices climb higher.

“The best thing you can do is to be exceptionally good at something,” Buffett said. “Whatever abilities you have can’t be taken away from you – they can’t actually be inflated away from you.”

Buffett said the way you get paid or the amount may change with inflation, but if you’re the best at what you do, people will always be willing to exchange some of what they produce for what you deliver.

“The best investment – by far – is anything that develops yourself,” he said.

(Here are some of Buffett’s other top tips for beating inflation.)

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.