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Political uncertainty stopping you buying stocks? Here’s what Warren Buffett says!

T Sligo
close-up photo of investor Warren Buffett

Scarcely a day goes by that Brexit is not the leading story in a newspaper. Then there is the upcoming general election, which is adding further uncertainty to the country’s future.

This political uncertainty is not isolated to the UK. The US-China trade war is giving jitters to investors and businesses exposed to the area, as are the mass protests in Hong Kong. It’s no surprise that share prices for businesses such as HSBC have slumped over the past few months.

It’s worth asking ourselves whether there is ever a perfect time to buy shares.

Throughout history, there has always been something, somewhere, that could cause political uncertainty or affect business.

Historically, the stock market has shown that over the long term it will continue to grow. Although there is no guarantee that the same will happen again.

What does a legendary investor, like Warren Buffett think about political uncertainty?

Uncertainty

Buffett has been investing since he was 11 years old. Considering he’s now 89, it’s fair to say that he’s experienced investing through political uncertainty and turbulent markets.

One of Buffett’s famous letters to Berkshire Hathaway shareholders, released in 2013, is a gem for investors who are interested in his take on the topic.

In the letter, the Sage of Omaha came down on American bosses who complained of uncertainty, saying that “of course the immediate future is uncertain; America has faced the unknown since 1776.”

For investors in the US, Buffett saw no reason that the future should be any different in the long term than in the past: “American business will do fine over time. And stocks will do just as well certainly since their fate is tied to business performance.”

Buffett seems to think that fortune will be on the side of the long-standing investor, and we should refrain from timing the market as he believes “it’s a terrible mistake to dance in and out of it based upon the turn of tarot cards.”

To some, these comments might fly in the face of his actions lately. Despite making several large transactions over the past few months, Berkshire Hathaway is sitting on a record $128b of cash.

Is Buffett timing the market?

Timing the market, or time in the market?

Buffett has proclaimed that he is on the hunt for an elephant-sized transaction, hence the record stash of cash.

These sorts of businesses aren’t often available for acquisition. In the recent past, Buffett has expressed a desire to invest in the UK and Europe, even attempting to buy Unilever through his investment in Kraft-Heinz.

Most of us won’t be on the hunt to wholly acquire a business of this size. And this is the point: as private investors, we have a bit of an edge over the professionals. We can put a £1,000 into a few businesses here and there, and not worry about finding a business to purchase in its entirety, or justifying our rationale to shareholders.

Ultimately, no one can answer with any degree of certainty what will happen in the future. That’s why if you’re going to invest, I think it’s unwise to try to time the market.

For me, time in the market is far more important.

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T Sligo has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2019