Investing.com | May 06, 2024 04:29AM ET
Warren Buffett sent a clear message of caution at Berkshire Hathaway's (NYSE:BRKb) annual shareholders' meeting, held for the first time without his longtime partner Charlie Munger. Two key actions signaled a sentiment shift:
While the Apple stake reduction was attributed to "profit-taking," it's worth noting that Apple alone represents a significant portion (around $3 trillion) of the magnificent 7 companies with a combined market capitalization of approximately $13 trillion.
Apple's significant presence in stock indexes and ETFs globally, like the MSCI World (NYSE:URTH) where it carries a weight of 3-4%, underscores his point.
Buffett emphasizes that with current valuations, holding cash in short-term government bonds yielding over 5% is preferable to the stock market. In other words, he's waiting for a major market correction before resuming buying. This is evident in his current cash allocation of 33%, showcasing his cautiousness, even for someone widely considered the world's best investor.
While we might not have Buffett's resources, we can still adopt his prudent approach in several ways. Here's what one could do:
Despite the recent correction in April, the last year of the presidential election cycle has been positive so far.
With inflation under control, rising earnings, and contained geopolitical tensions, the second half could be promising as well.
However, corrections are inevitable (around 5-10% at least once a year), and accepting them is part of being a wise investor.
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