In Berkshire Hathaway’s annual report for FY2017, chairman Warren Buffett gave examples of “four truly major dips” suffered by Berkshire shares in the past.
“Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value,” Mr Buffett said.
The legendary investor said the examples offered “the strongest argument I can muster against ever using borrowed money to own stocks”.
“There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions,” said Warren Buffett.
“The light can at any time go from green to red without pausing at yellow,” Mr Buffett added.
When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt, the legendary investor said, adding that that’s the time to heed these lines from Kipling’s If:
“If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you…
Yours is the Earth and everything that’s in it.”