HomeBusiness3 things investors need to do in 2025

3 things investors need to do in 2025

It can pay to listen to Warren Buffett. The legendary investor has navigated multiple market cycles and generated market-beating returns for his investors for nearly 75 years. What does Buffett say now? Well, the investor has been quite withdrawn lately (I don’t blame him; he’s 94 years old). The next time we’ll likely hear from Buffett will be in his annual letter to shareholders and the annual meeting for Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) investors this spring.

What we can do today is look at Buffett’s actions with Berkshire Hathaway’s invested assets. Right now, one move stands above the rest: the company’s massive cash pile. At the end of the third quarter, Berkshire Hathaway had $325 billion in cash and equivalents on its balance sheet. The money was raised through internal profit generation and the sale of winning investments such as Apple.

Buffett isn’t necessarily calling for a stock market spike. The man has said time and time again that when he has excess cash, it is not because he believes the market will collapse immediately. However, it does mean that he is unable to find stocks that he can comfortably invest in at current prices, suggesting that there may be some excess in the market at the moment. The last time Berkshire Hathaway’s cash pile rose this quickly was just before the dot-com bubble burst.

You don’t have to sell everything and start making money just because Buffett has a record pile of cash. However, you can take Buffett’s advice and trade rationally when the market has an animal spirit. Here are three things Buffett likely wants investors to do in 2025, with markets near record highs.

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Many reading this will have had fantastic stock returns in recent years. I bet some of you are up over 100% in 2023 and 2024. These returns can lead to more aggressive thinking. Shouldn’t I strike while the iron is hot?

One way to do this is to add leverage to your portfolio or put your stocks on margin. You can earn margin by investing in exchange-traded funds (ETFs) that use borrowed money to earn returns, or by taking out a loan against your brokerage account. In good times this can yield phenomenal returns. The 3x Nasdaq-100 Leveraged ETF is up 367% since the start of 2023, compared to 92% for plain old Nasdaq-100 ETF without leverage.

Buffett – as well as his late great partner Charlie Munger – would recommend avoiding leverage in your portfolio at all costs. Why? Because when the market turns (which it inevitably will from time to time), the downside can wipe you out. The Nasdaq leveraged ETF had a huge pullback in 2022, and that was just one year of poor returns.

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