Warren Buffett’s Thoughts on Timing the Stock Market

Dear DTA, 

The market looks expensive here. Thinking about selling out of what I’ve got. I want to buy back in cheaper. How should I time this? 

-Lisa R. 

Hi, Lisa.

Great to hear from you. Thank you for writing in.

I hear what you’re saying. The S&P shot up approximately 30% in 2019. It’s been a crazy ride.

However, I’d be very careful here.

The last thing you want to try to do is time the market.

If there’s one thing you take away from my advice today, it’s this:

Time in the market matters more than timing the market. 

This is true for long-term investors. And if you are an investor, you should always be thinking long term.

Compounding is an incredible force, Lisa.

But it works best when you stay patient and let it do its magic.

There are ups and downs in the stock market. That’s because there are ups and downs with businesses and the general economy.

Trying to capture the ups without suffering the downs is nigh impossible.

And you could be doing yourself a great disservice in attempting to go after such a thing.

The stock market is basically rigged in your favor, assuming you invest in great businesses over time and let them go to work for you.

I can say that being a long-term investor has been a boon for me.

Just as well, though, you have to be thoughtful about how you go about investing.

Picking a strategy, then sticking with it through the good and bad, is key to success.

I took up the strategy of dividend growth investing back in early 2010.

And I’ve stuck with it ever since.

Doing so has dramatically changed my life.

This strategy espouses owning stock in world-class enterprises that pay shareholders reliable and rising cash dividends.

Fellow contributor Dave Van Knapp lays out the A-Z of DGI in his comprehensive set of Dividend Growth Investing Lessons.

It’s simple, Lisa.

I lived below my means and invested my capital into high-quality dividend growth stocks you can find on the Dividend Champions, Contenders, and Challengers list.

I built the FIRE Fund in the process.

Jason Fieber's Dividend Growth PortfolioThat’s my real-money portfolio.

And it generates the five-figure passive dividend income I live off of.

Yes. I live off of dividend income.

Not only that. I live off of dividend income in my 30s.

This investment strategy helped me become financially independent and retire in my early 30s, as I lay out in my Early Retirement Blueprint.

It would have been nigh impossible for me to trade my way to an early retirement.

The odds are really good that I would have gambled away my money on stock moves.

And I’d now be stuck back at my miserable day job.

Instead, I’m living out my early retirement dreams.

If you don’t believe me on this, I’ll pass along some knowledge from Warren Buffett.

He’s taken advantage of long-term investing, using the power of compounding to grow his fortune well into the billions of dollars.

Here’s what he has to say about this subject (to CNBC in October 2014):

“If they think they can dance in and out [of the market] and buy and sell stocks, they ought to head for Las Vegas. I mean, they can’t do that. But what they can do is determinate that there’s a number of solid American businesses, a great number of them, and if you own a cross section of them and particularly if you buy them over time, you basically can’t lose.”

Warren Buffett is telling you that you have a choice, Lisa.

You can “head to Vegas”, where the house wins.

Or you can play the long-term investing game, which you basically can’t lose.

I don’t know about you, but I like the odds in that second scenario much better.

All that said, the market does look frothy here.

I’ll give you that.

However, that doesn’t mean that there aren’t any opportunities.

The S&P 500 has ~500 stocks in it.

Some are expensive at any given time. And some look cheap.

It’s up to you, as the investor, to discern the difference.

Undervalued Dividend Growth Stock of the Week by Jason FieberFear not, though.

I do my best to help you in this endeavor, via my Undervalued Dividend Growth Stock of the Week series.

Every Sunday, I uncover a high-quality dividend growth stock that appears to be undervalued at the time of publication.

Each stock has to pass numerous hurdles as they relate to fundamentals, competitive advantages, risks, and valuation.

This series could provide you with just the opportunities you need in an expensive market.

I understand where you’re coming from, Lisa.

But I implore you to consider avoiding dancing in and out of a game that’s setting you up to win.

Regardless of what you decide to do, I’ll leave you with my best advice of all.

Start today. 

I wish you luck and success.

Jason Fieber

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