We're coming to you live from the 2014 Berkshire Hathaway (BRK.B -0.26%) (BRK.A -0.30%) annual shareholder meeting in Omaha, Nebraska. We are transcribing the famous Buffett and Munger Q&A and live chatting with Fools around the globe! Click HERE to access this free live chat!
Everyone knows when it comes to investing wisdom, nobody beats Warren Buffett.
During the day-long Berkshire Hathaway annual meeting, Buffett and his long-time partner Charlie Munger field questions from dozens of shareholders.
Despite the public perception that Buffett is a "stock-picker," the majority of the day's discussion actually surrounds Berkshire Hathaway's operating businesses like GEICO, Berkshire Hathaway Energy, and BNSF. But Warren Buffett still managed to provide some investing wisdom and display one of his best qualities: Self-awareness.
Don't time it
It's tempting to try and "time" the stock market and purchase shares at the lowest possible point. History tells us doing this is extremely dangerous. Warren Buffett doesn't do it, and neither should you.
A shareholder asked Buffett if he regretted not plowing all of the Berkshire's expendable cash into his favorite stocks at the bottom of the market in the spring of 2009 -- as opposed to striking preferred stock deals.
Buffett quickly admitted that would have been the ideal move, but he and Charlie "have never figured out how to do that and never will."
Think about that for a second.
Warren Buffett, the most successful long-term investor of all-time, just admitted that he will never figure out how to determine the absolute "bottom" of the stock market during a downturn.
During the financial crisis downturn, Buffett and Berkshire made of the majority of their deals in the fall of 2008, held onto some cash, and stomached the paper losses as the market marched lower. Some would say Buffett missed a huge opportunity by not plowing the rest of the cash into the market in March 2009.
He disagrees. Because Berkshire hadn't tied up all of its capital in stocks, the company was able to purchase BNSF in the fall of 2009 -- an acquisition he calls an "enormous part of [Berkshire's] future.
The lesson
This is just one example of how Buffett's self-awareness helps him make good decisions. Buffett knows he's a super-investor, but he also knows his limitations. In an industry (investing) where over-confidence will garner short-term attention, Buffett understands if he steps out of his "circle of competence," he will get burned.
Individual investors should try and understand what they need to do to be successful.
If you buy and hold index funds, don't deviate from that process when you're tempted to buy the "hot stock" that your co-worker has already made 245% on. If you're a bottoms-up stock investor, don't try and "trade the Fed" or time the gold market.
Warren Buffett knows he's not a market-timer. Do you know what you are?
