Gary Miller CNBC
Warren Buffett took a special moment at the beginning of the annual meeting of shareholders of Berkshire Hathaway to talk about the record number of new investors rushing into the markets.
The lesson was about the uncertainty surrounding individual stocks, comparing the top 20 stocks in the world by market value as of March 31
The largest companies in 1989 included the $ 104 billion Industrial Bank of Japan, Sumitomo Bank, Exxon, General Electric and IBM. Today, the list includes Apple, Saudi Aramco, Microsoft and Amazon.
The billionaire noted that the value of the world’s leading companies (Apple worth more than $ 2 trillion) has increased significantly, but it is important that today there is not a single company on the list that was there in 1989.
“We were just as confident as we were on Wall Street in 1989 as we are today. But the world can change in very, very dramatic ways,” Buffett said.
While the huge increase in the value of the world’s leading companies (now costing trillions instead of billions) tells you some things about equality and inflation, it mainly tells you, “that capitalism has worked incredibly well, especially for capitalists,” the investor said.
Buffett’s main lesson for new investors was that the change in individual best stocks over time has shown the importance of having a broad, well-diversified portfolio, for example through passive index funds.
“One thing that shows, by the way, is a great argument for index funds. The main thing you have to do is get on board the ship,” he said.
Retail brokerage firms have reported a growing number of consumers since the start of the Covid-19 pandemic, with some studies showing that many of these consumers are first-time investors. The increase is due in part to checks on incentives that have increased personal incomes in the United States and the lack of entertainment opportunities during the pandemic.
This growth boom continued in the first months of 2021. Against the backdrop of GameStop’s trading wave and another round of fiscal stimulus checks, the Robinhood stock trading app added more than 5.7 million customers in the first two months of the year. according to JMP Securities forecasts. In addition, legacy e-broker Charles Schwab added more accounts in the first quarter of 2021 than in the whole of 2020.
Buffett also warned investors of the difficulty in identifying winners in new and growing industries. He pointed to the large number of companies that made cars in the early 1900s, most of which closed or left the car business long before the industry matured.
“There’s a lot more to choosing stocks than just figuring out what a wonderful industry will be in the future,” he said.
– Maggie Fitzgerald of CNBC contributed to this report.
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