3 Things Investors Need to Do in 2025

MT HANNACH
8 Min Read
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It can pay to listen to Warren Buffett. The legendary investor weathered multiple market cycles while generating market-beating returns for his investors for nearly 75 years. What is Buffett saying right now? Well, the investor has been quite reclusive lately (I don’t blame him; he’s 94). The next time we will likely hear from Buffett will be in his annual letter to shareholders and at the annual meeting of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) investors this spring.

What we can do today is look at Buffett’s actions with Berkshire Hathaway’s invested assets. Right now, one stock stands out above the rest: the company’s massive amount of cash. At the end of the third quarter, Berkshire Hathaway had accumulated $325 billion in cash and equivalents on its balance sheet. The funds were raised through internal profit generation and the sale of winning investments such as Apple.

Buffett isn’t necessarily calling for a stock market spike. This man has repeatedly said that when he has excess cash, it is not because he believes the market will collapse immediately. However, this means he is unable to find stocks he is comfortable investing in at current prices, indicating that there may be excesses in the market at the moment. The last time Berkshire Hathaway’s cash flow grew this quickly was just before the dot-com bubble burst.

You don’t need to sell everything and go to cash just because Buffett has a record cash reserve. However, you can follow Buffett’s advice and act rationally when the market has animal spirits. Here are three things Buffett probably wants investors to do in 2025, when markets are near all-time highs.

Many of those reading this will have achieved fantastic stock market returns over the past few years. I bet some of you are up over 100% in 2023 and 2024. These returns might lead to more aggressive thinking. Shouldn’t I strike while the iron is hot?

One way to do this is to add leverage to the portfolio or put your stocks on margin. Margin can be earned by investing in leveraged exchange-traded funds (ETFs) that use borrowed money to increase returns or by taking out a loan on your brokerage account. In good times, this can generate phenomenal returns. THE 3x Leveraged Nasdaq-100 ETF is up 367% since the start of 2023 compared to 92% for the simple old Nasdaq-100 ETF without leverage.

Buffett – as well as his late partner Charlie Munger – would recommend avoiding leverage in your portfolio at all costs. For what? Because when the market turns (which it inevitably does at times), the decline can destroy you. The Nasdaq Leveraged ETF saw a massive decline in 2022, and it was just a year of poor returns.

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