Buffett's Advice: Invest For Keeps, Don't Gamble On Market

Between 2020 and 2022, stocks shot toward the moon. This year, they've jettisoned back to Earth.

Photo Insert: Billionaire Warren Buffett had a warning for investors at his annual Berkshire Hathaway shareholder meeting in April.

The S&P 500 (INX) is down roughly 18% year to date, inflation rates are at 40-year highs, geopolitical chaos reigns, and a recession looms. According to Nicole Goodkind for CNN Business on July 22, 2022, the easy-money environment that many investors have grown accustomed to over the last 13 years is in the rearview mirror.

Risky bets on meme stocks, SPACs, and NFTs have dried up, giving value stocks with more stable near-term cash flows an advantage in today's fear-driven market. The S&P 500 Growth Index, which tracks stocks with the best three-year revenue and earnings per share growth, has dropped nearly 15% in the last year.

Over the same time period, the S&P 500 Value Index, which tracks stocks with the best valuations, fell by only 4.8 percent.

"Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism," Warren Buffett warned investors at his annual Berkshire Hathaway shareholder meeting in April.

"They don't make money unless people do things, and they get a piece of them. They make a lot more money when people are gambling than when they are investing." According to the Oracle of Omaha, the difference between gambling and investing is understanding a company's fundamentals.

It is explained further that Technical Analysis is primarily based on stock price and volume. Traders are not attempting to forecast a company's future. They do not examine the underlying business or the economy, but instead use charts and identify patterns to forecast where a stock will go.

Fundamental Analysis, on the other hand, occurs when an investor assesses a company's financial position, performance, competition, and the economy to determine its value, then purchases that stock at a discount.

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