Legendary investor Warren Buffett has given investors numerous memorable quotes over the years. One in particular might be especially relevant today, given the stock market’s recent performance.
The S&P 500 (^GSPC 0.10%) is on pace for its fourth consecutive year of double-digit returns. Tech stocks have done even better, thanks to the artificial intelligence (AI) boom. The iShares Semiconductor ETF (SOXX 0.31%) is up 116% year to date and more than 300% over the past three years.
Bullish sentiment is high right now, but Buffett would probably encourage investors to tap the brakes a bit on their expectations.
He has famously said, “Be fearful when others are greedy, and be greedy when others are fearful.”
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Human nature often pushes investors to do the opposite. They’ll continue buying even as valuations get stretched and sell after prices have already gone down. Buffett’s 13-word quote is an endorsement of a very simple investing principle: Buy low and sell high.
Buffett is about as much of a long-term buy-and-hold investor as you’ll find, so I doubt he’d suggest that people should be selling right now. But he’d almost certainly be telling investors to take stock of current conditions and not get caught up in a wave of enthusiasm.
When greed takes over the markets, caution is usually the wiser course of action. It’s a lesson that investors should keep in mind right now.
David Dierking has positions in iShares Trust-iShares Semiconductor ETF. The Motley Fool has positions in and recommends iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.