Always be ready for the worst

Idea of catastrophe and danger . Mixed media
Sergey Nivens / Shutterstock
Buffett said a 'megacatastrophe' was coming.

They don't call him an oracle for nothing. The multibillionaire said during an interview in March: "I've always felt a pandemic would happen sometime."

Last year, he warned that we were due for a "megacatastrophe." It would be some kind of "total surprise" that would dwarf devastating hurricanes Katrina and Michael, Buffett warned his Berkshire Hathaway company shareholders, in a letter.

He said Berkshire, which is big in the insurance business (it owns Geico and other insurers), would suffer massive losses — but would be ready for business the next day.

A good way for you to prepare for whatever comes is by buying life insurance to protect your loved ones. In just 90 seconds, you can find multiple life insurance rates tailored to your family’s needs and costing as little as $1 a day for $1 million in coverage, depending on your age and where you live.

Join Masterworks to invest in works by Banksy, Picasso, Kaws, and more. Use our special link to skip the waitlist and join an exclusive community of art investors.

Skip waitlist

Don't carry credit card balances

Young man eating asian sushi from home delivery using credit card as payment with open hand doing stop sign with serious and confident expression, defense gesture
Krakenimages.com / Shutterstock
Buffett says if you're carrying credit card debt, get rid of it

With layoffs skyrocketing during the outbreak and lockdowns, Americans have been piling on more credit card debt: 47% now carry balances, up from 43% in March, and nearly a quarter say they've taken on more card debt amid the economic crisis, a CreditCards.com survey found.

Turning to credit cards because of financial hardship is one thing, but Buffett says some people use them as "a piggy bank to be raided." He recently told his company's shareholders about a friend who asked what to do with a windfall. It turned out 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 said he told her. "You can’t go through life borrowing money at those rates and be better off."

Whenever credit card debt seems overwhelming, a good first step toward getting rid of it is to scoop it all up into a debt consolidation loan — at a much lower interest rate than 18%.

Be careful with stocks

Covid-19 disease prevention. Aircraft interior cabin deep cleaning for coronavirus.
Pradpriew / Shutterstock
Buffett has gotten out of airline stocks because of COVID-19.

The coronavirus crisis is ravaging entire industries, including retail, restaurants and entertainment. Buffett has decided the damage to one particular industry is more than he can bear as an investor.

"The airline business — and I may be wrong, and I hope I’m wrong — changed in a major way," he said at Berkshire Hathaway's recent online shareholders meeting, to explain why the company sold off all the airline stocks it owned.

Buffett says people have been discouraged from flying, so "the world has changed for the airlines."

One of the carriers Berkshire dumped from its portfolio was Delta Air Lines, whose stock price has plunged by about two-thirds since the start of the year.

Buffett looks out for his shareholders the way a robo-advisor can protect a Main Street investor like you. These automated investing services automatically adjust your portfolio to give you some cushioning whenever individual stocks or whole sectors tank.

Sign up for Credit Sesame and see everything your credit score can do for you, find the best interest rates, and save more money at every step of the way.

Get Started—100% Free

Stick to your long-term plan

Close up shot of the dart arrow hit on bulleyes of dartboard to represent that the business reached the target of company with dark tone picture style. Target and goal as concept.
Things / Shutterstock
Buffett says stay on target with your financial goals.

Warren Buffett says he's confident the U.S. economy will bounce back from the COVID-19 pandemic.

"Nothing can basically stop America," he said at the virtual shareholders meeting. "We haven’t really faced anything that quite resembles this problem, but we faced tougher problems. The American miracle, the American magic has always prevailed, and it will do so again."

But he also said no one knows what's going to happen, so investors should brace themselves for a potentially long recovery.

"You’re going to get a fine result if you own equities [stocks] over a long period of time," Buffett said.

In other words, you need to hold on tight during times like these. A financial planning service can help you stay focused with your investments. Today, you can connect with a certified financial planner online and inexpensively, to keep you on track with your long-term goals.

Take advantage of low interest rates

Red icon of interest on the background of coins
1599686sv / Shutterstock
With interest rates falling, Buffett says it's a great time to borrow.

Buffett became one of the wealthiest people on the planet by taking advantage of opportunities. He sees some fantastic opportunities right now, courtesy of the Federal Reserve.

"This is a very good time to borrow money, which means it may not be such a great time to lend money, but it’s good for the country that it’s a good time to borrow money," he told his shareholders.

The Fed "did the right thing" by cutting interest rates down to the bone, Buffett says.

For homebuyers and homeowners it's an excellent time to borrow: New and refinance mortgages are being offered at the lowest rates on record. Shop around and compare mortgage rates to land the best one you possibly can.

Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

About the Author

Doug Whiteman

Doug Whiteman

Former Editor-in-Chief

Doug Whiteman was formerly the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

What to Read Next

Disclaimer

The content provided on MoneyWise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.