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Warren Buffett Says the Stock Market Is Like a Casino — Investors Should Resist ‘Foolishness’
By Pete Grieve MONEY RESEARCH COLLECTIVE
“The casino now resides in many homes and daily tempts the occupants,” the Berkshire Hathaway CEO wrote in his annual letter.
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Berkshire Hathaway CEO Warren Buffett sees increased “casino-like behavior” in financial markets — and is reminding investors it’s hard to beat the house gambling.
In his annual letter to shareholders, published online Saturday, Buffett criticized those who buy “hot” stocks or chase short-term gains. Instead, he said companies like Coca-Cola and American Express, which are such powerful players in their respective industries that it’s hard to imagine a world without them, are what you want to own.
Buying these sorts of “timeless” stocks when they’re undervalued — and then being patient — is the path to greater wealth, according to Buffett, who is a famous champion of long-term value investing. (Of course, it’s also important to have a diversified portfolio.)
Meme stock investments, short-term trades and uncalculated options plays, on the other hand, are antithetical to Berkshire Hathaway’s way of operating. These high-risk investments can be a trap for undisciplined investors with unfettered access to trading apps.
“For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young,” Buffett wrote in the letter. “The casino now resides in many homes and daily tempts the occupants.”
Investors should watch out for institutions that are encouraging “foolishness” and keep in mind that rash, frenzied trading behavior helps their bottom line, not yours, Buffett said. If you invest too much of your money in a volatile individual stock, it’s easy to get burned.
At 92, Buffett is one of the most influential figures in the investing world, admired for the success of Berkshire Hathaway, a holding company that’s beaten the market during the nearly six decades he’s been at the helm.
In this year’s edition of his popular letter, Buffett said that market participants “are neither more emotionally stable nor better taught” now than when he started his career. That means you can still find opportunities to invest in undervalued stocks and see your investments grow over time: an approach that’ll likely work out better than treating investing like gambling.
“Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been — and will be — rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes,” Buffett said.
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Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.