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Warren Buffett and his Effect on the Stock Market! Part 2

By: Bob Obrien

Article Category: SML Stock Market

I wrote an article a couple of weeks ago, in which I laid out some reasons as to why I thought that Warren Buffet is very misinterpreted and misunderstood. Buffet is indeed one of the greatest investors to ever walk the face of the earth, and his strategies and ideas carry tremendous weight. He influences the influencers and very often his beliefs are taken out of context and therefore misunderstood and lead to stock bubbles.
When you listen to Buffett and talk about bonds, you would think they are the worst investments ever, and that everyone should be investing in 100% stock all the time. The truth of that matter is that Buffet does not like bonds, but he is never 100% invested in stocks. Buffet prefers cash over bonds, and when you step back for a second there is not a huge difference between bonds and cash when you are stock investor. Both have an inverse correlation to stocks and are relatively safe, but cash is even safer.

When it comes to market timing if you listen to Buffet you would think that he is dead set against it. Nevertheless, his fortune has been built on being patient and waiting for the market to take a big drop, and then going in and buying everything cheap. Is this not market timing? You better believe it is!

Market timing is really one of those things where most people are either on one end or the other. They either feel that is impossible or that is the only way to invest. Nobody can predict what is going to happen in markets consistently time after time, but when you close your mind to market timing you lose the flexibility necessary to be a good investor.

Buffet is much more of a mystery than he would lead people to believe, and although he called derivatives weapons of mass destruction he himself has owned them. If you are looking for black and white investing tips, Buffet is not the place to start, like he has said "Investing is not complicated, but it is far from easy'.

About Author: Senior Instructor - MyWealth