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Published: Feb 27, 2024 3 min read

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A photo-illustration of Warren Buffet with poker chips and playing cards.
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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.)

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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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