Warren Buffett's Advice for Investors in 2025

part of the reason they're going to be plenty of opportunities is other people doing dumb things this year stock market investors are going to face three really big challenges unique to 2025 reasonably High interest rates overvalued stock prices and the ongoing effects of rampant speculation the markets now all of these make investing pretty tough right now but luckily for us the world's best investor Mr Warren Buffett has spoken extensively on each of these topics across the last year or two so in this video I want to turn to one of the brightest investing Minds on

the planet today to understand how we should be going about our investing in 2025 now the first issue that really heavily impacts investors today is interest rates and for the first time in a long time I'm talking a good couple of decades investors are dealing with much higher interest rates to what they used to in America the Federal Reserve basically since the global financial crisis has kept interest rates at almost zero but as we know thanks to the Hefty postco inflation rates will hike from 0 to around 52% now we have seen three rate Cuts

so far bringing the FED funds rate down to around 42% but that's still a lot higher than what's been observed for much of the last couple of decades and why is this important it's because interest rates directly impact treasury bonds and treasuries kind of act as the yard stick to which all investment opportunities are valued interest rates you know basically are to uh the value of ass as what gravity is to matter I mean if if I could reduce gravity pole by about 80% I mean I'd be in the Tokyo Olympics uh jumping how does

this work well as interest rates rise the return you get from new government bonds Rises and as they fall then naturally the return you get from treasuries Falls now treasury bills are deemed incredibly safe in the investment community and what this means is that when interest rates are hiked more of the big money is inclined to take their money out of stocks and keep it locked in safe short-term treasury bonds which right now is a reasonably good deal with the yield of 4.3% it's nothing amazing but it's good for such little risk but what that

means generally is that because so much money is returning to the safe haven of bonds when interest rates are high it can be a lousy time for investors who like to keep lots of their money in St stocks the big money tends to favor bonds and high interest rates also makes it tougher for businesses to get financing to grow and for companies holding a lot of debt when that debt is rolled over it also takes more money out of their pocket to service the debt High interest rates make times harder for businesses and one common

concern amongst stock investors heading into 2025 is the idea that if inflationary forces persist such as Global conflicts tariffs geopolitical tensions increased militarization ongoing government spending well it's not too out of the realm of possibility for interest rates to stay at these elevated levels for a long period of time which may put businesses under the pump now this is a very interesting discussion topic because so far these tougher economic conditions actually have not led to a huge tightening of stock market valuations and actually the S&P 500 the 500 largest stocks in America collectively Rose 23%

in 2024 on the back of a 24% rise in 2023 and yes we are going to discuss that in a little bit but there's still some concern out there of sticky inflation putting pressure on the FED to keep rates higher for longer which should put pressure on business performance so with that hypothesis in mind what is Warren Buffett doing about it that's what we're going to talk through next but before we do I want to talk you through a problem that a lot of us are facing today which is Spam your phone I get those

infuriating scam texts all the time your email actually my spam problem got so bad for my old email address I had to completely abandon it and just start a new one I'm not even joking and the reason why we all get so much spam these days is because scammers can buy your information so data Brokers they know your name they know your number they know where you live and then they will sell this information to to the highest bidder and it happens more frequently than you think just recently BT group in the UK formerly British

Telecom confirmed that its BT conferencing business division shut down some of its servers following a ransomware breach leaving a lot of people exposed this stuff literally happens all the time even if you're protective of your data but that's where today's video sponsor incog can help out cuz what they do is they reach out to data Brokers on your behalf and they get you taken off these lists so all you have to do is sign up for incognet you give them permission to act on your behalf and then they go out and find what lists you're

on and demand that You' be taken off plus they also make sure your data stays off of the market by conducting repeated removals taking your data down if it somehow pops up again that's why I'm on the yearly subscription now and if you'd be interested in trying this service out for yourself and getting your data out of data broker's hands you can sign up using the link in the description and pin comment and by using the referral code new money you can score 60% off an annual plan so thanks to incog for sponsoring this video

and now back to Buffett and as I was saying there is still the concern out there of persistent inflation which will keep rates high for longer but then what is Warren Buffett doing about it well the truth is he's actually selling some of his share portfolio namely his monster Apple position to specifically put more money into bonds but I don't mind at all under current conditions building the uh cash position I think uh when I look at the alternative of what's available and the equity markets and I look at the composition of what's going on

in the world we find it quite attractive and in reality that cash he talks about is actually held in treasury bonds so when he says he doesn't mind building the cash position he really means building the pile of short-term us treasuries as you can see in the most recent quarter versus the same quarter 12 months ago it actually has bur's cash position reasonably even but as you can see Buffett has reduced the stock portfolio and sits that extra cash in in short-term us treasuries that have grown quite substantially so that's really the first thing we

can take away from Buffett's actions over the past 12 months in these higher interest rate environments when things seem reasonably shaky around the world and uncertainty rules the day don't forget about bonds we've had 125 billion or so in very shortterm Investments and believe it or not not that long ago we were getting four basis points which is next to nothing on that 12 25 billion which means we were getting 50 million a year and now the same money the other day or day before yesterday we actually bought 3 billion of bills of the 5.92

bond equivalent yield so we will have what produced us not that long ago on a 12- month basis was producing 50 million a year producing something in the area of 5 billion a year so sure they're nothing spectacular they're not flashy or interesting but they do serve a purpose particularly when everywhere you look valuations on any sort of decent businesses just sit at Skyhigh levels and that actually leads us straight into the second big problem investors fac in 2025 and that is lack of opportunities I mean Warren Buffett has been very vocal about this over

the past year or two because it really isn't making a whole lot of sense you know interest rates are higher but most big American companies are not struggling with their valuations in fact despite the higher interest rates valuations of American businesses are soaring and it's particularly evident in these soal called Magnificent Seven companies Amazon Apple Microsoft Tesla Google meta and of course Nvidia as investors bid these prices up believing these seven companies will be the main beneficiaries of AI adoption moving forward but the problem is this overvaluation in the market is leaving investors with very

little to nibble on at anything close to a reasonable price in a recent share hold a letter Buffett said in the years ahead we hope to move much of our excess liquidity into businesses that Burkshire will permanently own the immediate prospects for that however are not good prices are Skyhigh for businesses possessing decent long-term prospects and this is what Buffett had to say about the state of the market most recently at last year's shareholder meeting you're sitting on 168 billion of cash one what is Buffett waiting for and two why not at least deploy some

of it well I think that's pretty easy to answer I don't think anybody sitting at this table has any idea of how to use it effectively and therefore we don't use it now at 5.4% but we wouldn't use it if it if it was at 1% that last sentence referring to the fact that even if Buffett wasn't earning decent amounts from his cash by parking in treasury bonds he probably still wouldn't deploy it in the stock market at current valuations and while the job is a lot harder for Buffett to find companies to invest in

as these Investments need to move the needle for birkshire which is very very hard to do the problem is still very much there for most investors looking to invest in decently sized companies particularly in America any company showing decent signs of growth is rarely at a PE multiple below 25 or 30 which is making things very tough at this current point in time this is not a time when the phone is going to be ringing often but there have been times in my life that I've been a washing so many opportunities that I could have

invested everything by Nightfall and then there's other times when the year goes well not in the early days but now we haven't seen anything that makes sense that that moves the needle we only swing at pictures we like and uh it's just that they things aren't attractive and uh well there's certain ways that can change and we'll see whether they do and that leads us to the question well what do you do about it and well by looking at what Buffett is doing there are really two answers the boring one is that you don't really

do anything you build up the cash pile for a rainy day maybe look at avenues where you can minimize the impact of inflation such as treasury bonds and just stay patient while you keep searching for those hidden opportunities or the other option is to broaden your horizons look in the less analyzed markets which is exactly something that Buffett did a few years back when he made a sizable Diversified investment in five Japanese trading houses that was uh looking at company after company as I'll do every day and I just thought these were big companies they

were companies that I generally understood what they did and they were selling it what I thought was a ridiculous price uh particularly the price compared to the interest rates prevailing at that time and so by looking to other markets that aren't the US he can actually find cheap businesses and that was one of the ways Buffett was able to find a big multi-billion dollar investment just a few years ago you know he's doing it monish P is doing it Howard Marx gpar Charlie Munga was doing it before he passed away and it's a strategy I've

started to adopt as well you know at the end of last year I was in turkey with Matt Peterson scoping out big notable Turkish businesses with super low single-digit P ratios like Coca-Cola and tush to see if there might be something worthwhile there the only thing to note here though is to make sure you're staying firmly within your own circle of competence if you do go down this route the first rule is to make sure you don't go messing around in areas that you don't understand but with that said that's what Buffett is doing about

the overvaluation the lack of opportunities in the Market at the moment and the last investing theme of 2025 that I wanted to cover in this video which is closely related to the overvaluation we're seeing is the temptation to speculate you know in 2024 it's no secret we saw greed and hype absolutely takeover share prices exploded a long way away from business performance speculative assets like Bitcoin Rose over 100% And this momentum seems like it'll probably continue into 20 2025 and in these environments particularly for newer investors it can trigger a just a tremendous amount of

fomo so fear of missing out and ultimately if you're not super on top of your emotions it can encourage you to start speculating in highflying expensive stocks as opposed to making rational long-term Investments well the stock market we've had a lot of people under the casino in the last year you have millions and millions of people have set up accounts where they day trade where they where they're selling puts and calls where they uh I would say that you had the greatest increase in the number of gamblers essentially that and conditions lead to this place

where more people are entering the casino than are leaving every day and it creates its own reality for a while and nobody tells you when the clock's going to strike 12 and it all turns to pumpkins and mice but this is about as Extreme as we've seen it isn't it Charlie and Buffett is right when every is speculating it does kind of create its own reality for a while people speculate and that drives up stock prices which encourages more people to speculate and prices surge higher again and sure maybe this can make you some money

in the short run you know as we've seen recently but over an investing career it's one of the most dangerous behaviors you can fall into because if you're constantly treating the stock market like a casino you know it's only a matter of time before you get wiped out when things come back back to reality which eventually they always do so the challenge in 2025 is to train yourself to avoid speculation as Buffett has done over his whole career and one other point I wanted to bring up is to remember that the increased speculation in the

market right now might seem annoying for long-term investors because everything is just so high but it's actually not such a bad thing for long-term rational investors like Warren Buffett because it's the increased levels of speculation and trade in in the market today that moved the market much more rapidly than ever before and the market as we know can swing rapidly in both directions I I would argue that uh there's going to be plenty of opportunities and part of the reason that we going to be plenty of opportunities the the tech doesn't make any difference or

any of that new things coming along don't take away the opportunities what gives you opportunities is other people doing dumb things and well the 58 years we been running Burkshire I would say there's been a great increase in the number of people doing dumb things I think if you don't run too much money which we do but if you're running small amounts of money I think the opportunities will be greater and the reason they'll be greater if you're running a small portfolio like what we all do is because when something goes bang and the speculators

turn from greed to fear sending stock prices you know through the floor then you can immediately jump in and take advantage because while right now speculators are causing many stocks to Skyrocket things can go the other way equally as quickly and that's what Buffett is talking about here if you look at stocks as a business and treat the market as something that's doesn't tell you isn't there to instruct you but it's there to serve you you'll do a lot better over time then if you try to take charts and listen to people talk about moving

averages and look at the B pronouncements and all of that sort of thing and speculators let the market instruct them whereas long-term investors let the market serve them and that's a really important distinction to make the best investors like Warren don't feel the need to be doing anything in particular at any moment in time right now with everything so high he isn't feeling the pressure to get his billions in somehow in fact he's letting the market serve him and he's actually taking the opportunity to take profits namely in Apple at such high valuations then when

prices are super low say after the 2008 Global financial crisis for example Warren again let the market serve him but this time the market gave him many companies at extremely low valuations so he took up the opportunity to buy he bought Bank of America he bought Goldman Sachs GE even BNSF all which turned out to be extremely profitable Investments so I think that's really it you know in summary yes this year we will be battling in a market that's dealing with higher interest rates unfortunately we're also going to be battling uh a lack of opportunities

thanks to the crazy hype and speculation in many of America's large companies but we need not panic or feel pressure to do something that doesn't look great on paper remember Buffett's punch card analogy in your investing career imagine every time you buy a stock you have to punch a hole in the card and that card only has 20 punches in total then you're done long-term investing isn't a game where you likely making five or 10 Investments a year rather it's a game of staying patient and investing in those smack bang home opportunities that do come

around very infrequently or if you're not the type of investor to take an interest in stock analysis then the game is simply about market-wide diversification and dollar cost averaging through thick and thin that's the other thing that Buffett promotes and honestly that's really all there is to it those two strategies finally I do just want to say that if you're interested in learning the full Warren Buffett approach and you want to step-by-step walkthrough of the entire stock analysis process you can check out introduction to stock analysis which is a 7-hour professional video course I've created

with my team that is linked down in the description below but apart from that thank you guys very much for watching and I'll see you all in the next video [Music]