Warren Buffett Shares His 6 Top Financial Takeaways From the COVID Pandemic

1. Be practical — even when the market's losing its mind

Though the stock market made millionaires out of people who clicked on the right Reddit thread during COVID lockdowns, Buffett has advised his investors to take a long-term, practical approach to the market rather than making "30 or 40 trades a day to profit from what looks like a very easy game."

During his Berkshire Hathaway company's recent annual meeting, Buffett displayed a pair of slides that showed the 20 largest companies in the world by stock value today and in 1989. None of the companies on the list from ’89 was on the 2021 version.

The lesson: picking winners isn’t easy. "If you just had a diversified group of equities, U.S. equities, that would be my preference, but to hold over a 30-year period," Buffett said.

Be like Buffett: Investors who do their homework and make informed choices have been rewarded this year as the stock market has marched to new record highs, even amid the chaos of COVID-19.

The popular investing platform Wealthsimple helps Canadians reduce their risk by diversifying their money into stocks, futures and even the foreign exchange market.

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2. New to investing? Tap into the S&P 500

During the annual meeting, Buffett talked up his favorite investment — which has been a winner during the COVID crisis.

“I recommend the S&P 500 index fund, and have for a long, long time to people,” Buffett said, adding that, upon his death, 90% of the money he leaves his wife will go into an S&P 500 fund.

S&P 500 index funds are mutual funds or ETFs mimicking the familiar stock index that tracks 500 of the largest companies in the U.S. Despite the pandemic, the S&P 500 surged 16% in 2020, and it has been hitting new highs in 2021.

"I like Berkshire, but I think that a person who doesn’t know anything about stocks at all, and doesn’t have any special feelings about Berkshire, I think they ought to buy the S&P 500 index," Buffett told shareholders at the meeting, held in Los Angeles in early May.

Be like Buffett: Getting in on the S&P 500 action through an ETF or mutual fund doesn’t have to be complicated. You can start building a diversified investment portfolio today with just a few taps on your smartphone.

3. Investors should stay wary of some investments

The coronavirus crisis has ravaged entire industries. Airlines survived with help from government support. Take that support away, and you’d be looking at an entirely new kind of airplane disaster. The industry has months to go before anything resembling normal business — and normal profit margins — return.

“I still wouldn’t want to buy the airline business,” Buffett told his Berkshire shareholders.

One of the carriers Berkshire dumped from its portfolio was Delta Air Lines, whose shares lost more than half their value between March 1 and May 15 last year. That stock has since recovered, along with those of other major airlines, but Buffett has little confidence in the sector’s economic fundamentals.

Be like Buffett: Choosing the right stock out of thousands of potential options can make for a confusing entrance into the market. But several investing apps are available that can make the process a lot easier.

Find out which one is right for you, and get in the game.

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4. Take full advantage of low interest rates

Buffett sees fantastic opportunities for borrowers in 2021, thanks to commitments by central banks, including the Bank of Canada, to keep interest rates low.

“It’s a fascinating time,” Buffett told investors, adding that the low-rate environment "is enormously pleasant."

"The economy went off a cliff in March [2020],” Buffett said. “It was resurrected in an extraordinarily effective way."

Be like Buffett: If you're a homeowner and have a solid credit score, you could be in a position to get an unbelievable deal on a new mortgage.

Mortgage rates have inched up this year, but they’re still low enough that you could save hundreds of dollars a month by refinancing. Connect with a mortgage brokerage that will compare the best offers from Canada’s biggest lenders, to ensure you’re making an informed decision.

5. Credit card balances should be avoided

The pandemic, with its business closures and layoffs, has forced millions of people to rely on their credit cards to cover basic financial needs. It’s a fine survival strategy, but the resulting balances and high interest can make for long-term financial stress.

During Berkshire's 2020 shareholders meeting, which was held online, he recalled the advice he gave a friend who came into a windfall and was wondering about the wisest way to spend it. She told Buffett she also had credit card debt — at 18% interest.

"If I owed any money at 18%, the first thing I’d do with any money I had would be to pay it off," Buffett remembered telling her. "You can’t go through life borrowing money at those rates and be better off."

Be like Buffett: If your credit card debt is affecting your finances, experts say a good first step toward managing it is to roll it into a debt consolidation loan.

Not only will you simplify your life by reducing the number of bills you pay, but you’ll also slash your interest costs and pay off your debt faster. Instead of 18%, you might find yourself paying as little as 5.99% APR.

6. Always be ready for the worst

They don't call Buffett an oracle for nothing. In 2019, he warned that the world was due for a "megacatastrophe" that would dwarf the chaos created by hurricanes Katrina and Michael. When the coronavirus first hit North America, the multibillionaire said during an interview, "I've always felt a pandemic would happen sometime."

You’d expect that kind of foresight from someone so heavily invested in the insurance industry (Berkshire Hathaway owns several insurers), where planning for the worst is a central part of the business model.

“We've seen some strange things happen in the world in the last 15 months,” he told his investors this year. “And we always recognize the fact (that) stranger things are going to happen in the future.”

Be like Buffett: Prepare your family for whatever might come by buying life insurance. COVID-19 has shown how vital it can be to secure coverage for a family breadwinner.

In only a few minutes online, you can compare multiple life insurance rates to find a policy that's tailored to your family’s needs.