Billionaire investing icon Warren Buffett kicked off Berkshire Hathaway’s (BRK-B, BRK-A) annual assembly of shareholders by sharing some classes for new traders. 

“I’ll have one or two very short lessons for perhaps the new investors who are not necessarily in Berkshire Hathaway, but people who have entered the stock market in the last year, and … I think there has been a record number enter the stock market. I’ll have a couple of little examples for them,” Buffett mentioned in his opening remarks. 

A wave of new traders has flooded the inventory market, with lockdowns, no-fee buying and selling, and stimulus checks making it simpler to open up a brokerage account and begin buying and selling.

The 90-year-old “Oracle of Omaha” instructed this technology of first-time traders: “it’s not as easy as it sounds.”

The famed investor shared two objects for new entrants to the inventory market “to ponder a bit before they try to do 30 or 40 trades a day to profit from what looks like a very easy game.”

To illustrate his level, Buffett confirmed a slide of the 20 largest firms by market capitalization as of March 31, 2021, which incorporates Apple (AAPL), Saudi Aramco, Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG, GOOGL), Facebook (FB), Tencent, Tesla (TSLA), Alibaba (BABA), and Berkshire Hathaway (BRK-A, BRK-B) within the prime ten.

Warren Buffett slide displaying the 30 largest firms by market cap in 2021.

Highlighting that 5 of the highest six firms are American, Buffett reiterated his bullish message on the U.S., noting it’s “not an accident” and it’s a system that is labored “unbelievably well.”

Referencing the listing, Buffett urged new traders to make their very own guess as to “how many of those companies are going to be on the list 30 years from now?”

“What would you guess? Think about that yourself…Would you put on five, eight, whatever it might be?”

Buffett then juxtaposed a slide of the highest 20 firms from 1989 from market cap, which solely included six U.S. firms, that are noticeably absent from the 2021 listing.

Buffett's slide of the 20 biggest companies by market cap in 1989

Buffett’s slide of the 20 largest firms by market cap in 1989

“It is a reminder of what extraordinary things can happen. Things that seem obvious to you,” Buffett mentioned, later including, “The world can change, and very very dramatic ways.” 

Buffett mentioned it is a “great argument for index funds,” to personal a diversified group of U.S. equities over an extended interval. Buffett has lengthy argued that traders — each small and huge — could be higher off putting money in low-cost index funds, and thereby avoiding charges shelled out to lively managers to choose “the place to be,” from IPOs to SPACs today.

“I could tell you their best ideas in 1989 did not necessarily do that well,” Buffett mentioned. 

To additional his level, Buffett shared that in 1903, the yr his father was born, vehicles had been the thrilling trade. “Everybody started car companies just like everybody’s starting something now that can be where you can get money from people.”

Buffett shows a list of defunct car makers starting with the letter

Buffett exhibits an inventory of defunct automotive makers beginning with the letter “M.”

“But in any event, there were at least 2,000 companies that entered the auto business, because it clearly had this incredible future. And of course, you remember that in 2009, there were three left, two of which went bankrupt. So, there is a lot more to picking stocks than figuring out what’s going to be a wonderful industry in the future,” Buffett mentioned, including that “very, very, very few people the picked the winner.”

Buffett joined his long-time pal and companion Charlie Munger, 97, for a digital shareholders assembly held in Los Angeles, as a substitute of Omaha, Nebraska. Munger has lived in Southern California for almost 60 years. 

“So I just want to tell you,” Buffett instructed new traders, “it’s not as easy as it sounds.”

Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.

Read extra from the Daily Journal Meeting:

2021 Berkshire Hathaway annual shareholders  meeting

2021 Berkshire Hathaway annual shareholders assembly

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