At a 2005 Berkshire Hathaway (BRK.A -0.00%) shareholder's meeting, when asked about his thoughts on the economic outlook, Warren Buffett gave the following response:
"If the market gets cheaper, we will have many more opportunities to do intelligent things with money. We are going to be buying things -- one thing or another -- operating businesses, stocks, high-yield bonds, whatever -- we're going to be buying things for as long as I live, just like I'm going to be buying groceries."
This strategy of being a net buyer of assets has obviously paid off for Warren Buffett, as his net worth has now eclipsed $100 billion.
I think that too often, the investment community attributes Buffett's success entirely to a God-given gift for stock picking.
While the Oracle of Omaha has an exceptional affinity for analyzing businesses, I believe it's the above mindset that has made him one of the richest individuals in the world. He is a master of consistency and emotional control.
Just keep buying quality assets at good prices
In his book The Psychology of Money, Morgan Housel says:
Napoleon's definition of a military genius was, 'The man who can do the average thing when all those around him are going crazy.'
This is a perfect description of the Warren Buffett investing strategy. Instead of trying to make brilliant stock picks that will return 100-1, if you simply buy quality businesses at reasonable prices regardless of what the rest of the market is doing, you'll outperform over the long run.
The nickname the "Oracle" of Omaha is itself a bit of an enigma since Buffett is hesitant to ever make predictions about the market.
Another time he was asked about market forecasts, he responded with:
"I never have an opinion about the market because it wouldn't be any good, and it might interfere with the opinions we have that are good. If we're right about a business, if we think a business is attractive, it would be very foolish for us to not take action on that because we thought something about what the market was going to do. ... If you're right about the businesses, you'll end up doing fine."
The problem with spending a significant portion of your time analyzing economic conditions is that there's nearly always something negative going on in the world. So, if you wait for everything to look positive, you'll likely be sitting on the sidelines for years or even decades.
Meanwhile, the market will likely have continued to deliver healthy returns to investors as it has throughout history.
Leave the predictions to the 'experts'
If you watch financial news, you'll mostly see "experts" arguing about what they think the next six to 12 months have in store for the market. This will lead you to believe the most important thing for investors to do is to try and solve that puzzle.
And I would tend to agree if I thought it was reasonably possible. But even the smartest economic minds fail miserably at predicting the future.
If the greatest investor of our generation spends little time thinking about the economy in terms of his investment decisions, then maybe we too should focus on buying high-quality businesses instead of predicting next quarter's GDP or interest rates.