Famed investor and Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A) CEO Warren Buffett took the stage on Saturday for his popular annual shareholder meeting. Of course, this time he didn't have 40,000 people in attendance like he did last year but instead spoke to a virtual audience in a live-streamed remote event. Even billionaires have to social distance.

Investors all around the world look to Buffett's annual meeting as an opportunity to learn from one of the world's greatest investors and to hear his thoughts on the current economic environment. And during uncertain times like we are in now, the Oracle of Omaha's words carry even more weight.

So, what does Buffett, who has made his entire fortune in the stock market, think about stocks today? While he continues to refrain from making any near-term forecasts, he remains very bullish on the long-term prospects of American stocks.

A chart showing the stock market going up

Image source: Getty Images.

Bet on America

In a presentation on the economic future of the country, Buffett said he continues to think that American stocks will be good investments over the long haul. He is as convinced America is worth betting on today as he was during World War II, the Cuban missile crisis, 9/11, and the financial crisis.

Buffett explained:

We've faced great problems in the past. We haven't faced this exact problem. In fact, we haven't really faced anything that quite resembles this problem. But we've faced tougher problems. And the American miracle -- the American magic -- has always prevailed and it will do so again.

Driving his point home, Buffett noted that if all he did was buy a cross-section of America when he graduated college, he would have been able to turn every dollar into $100 while collecting growing dividends on top.

"You are dealing with something fundamentally advantageous, in my view, in owning common stocks. I will bet on America the rest of my life, and I hope my successors at Berkshire do it."

Specifically, Buffett said buying a cross-section of America is a worthwhile investment for most people -- even during times like these. Of course, the caveat is that buyers should hold the investment for the long haul.

Buffett said he believes the best way to buy a cross-section of America is to buy into an S&P 500 index fund. The S&P 500 is made up of 500 large companies listed on U.S. stock exchanges and index funds are lower cost than most mutual funds, some of which have load fees or much higher expense ratios. There are lots of ways to buy into the S&P 500 index, including buying the Vanguard S&P 500 ETF (NYSEMKT:VOO) or the S&P 500 (SNPINDEX:^GSPC) tracking index.

Be prepared to endure downturns

But Buffett made sure to warn investors about the cost of admission for the wealth-building returns that can be made in the stock market: volatility.

Warren Buffett at a Berkshire Hathaway shareholder metting.

Image source: The Motley Fool.

"[The market's rise higher over time is] going to have interruptions -- and you're not going to foresee the interruptions," Buffett explained. Further, the seasoned investor warned that two things could put investors in a position in which downturns could negatively impact investors' ability to build wealth, even if all they are doing is buying an index fund. First, investors could be overleveraged and be forced to sell stocks when they are down in order to pay their debts. Second, some investors may not be psychologically prepared to see the value of their stocks go lower (or even plummet) from time to time.

Turning to an analogy of owning a farm, Buffett said:

If you really had a farm, and you had this neighbor -- and one day he offered you $2,000 an acre, and the next day he offered you $1,200 an acre, and maybe the day after that he offers you $800 an acre, ... are you going to let this guy drive you into thinking, "I'd better sell because his number keeps coming in lower all the time"?

It's a very, very important matter to bring the right psychological approach to owning common stocks.

Bringing even more caution to the table, Buffett said he doesn't know whether stocks will go up in the next day, month, or even year. But he believes that, over decades, stocks will substantially outperform treasuries.

Putting his money where his mouth is

Some investors more familiar with Berkshire's recent purchases and sales of stocks may protest Buffett's stated bullishness on America, noting that Berkshire was only a net buyer of stocks by $1.8 billion in the first quarter -- a small amount considering Berkshire ended the period with a record $137.2 billion in cash, cash equivalents, and short-term investments. Further, Buffett said he sold his stakes in all four major American U.S. airlines during April, noting that there's too much uncertainty regarding airlines' future prospects in this environment.

But investors shouldn't forget that Berkshire's equities portfolio is currently valued at nearly $193 billion. And even this figure drastically understates Berkshire's bet on American business. The rest of the company's current $433 billion market capitalization is derived from the businesses Berkshire has bought outright over the years, including insurers, various consumer goods companies, a railroad, and many other companies.

So don't be fooled. Buffett's Berkshire is making a no-joke bet on America.

Of course, Buffett emphasized that there is a wide range of potential outcomes when it comes to the way things might pan out as a result of this current pandemic. But for those who are willing to buy a cross-section of American business and hold it for the long haul (even through the inevitable unexpected downturns), they will likely be rewarded handsomely over the next decade and beyond -- whether they buy today, tomorrow, or next year.


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.