Warren Buffett Says ‘Periodic Setbacks' Are Bound To Occur – But ‘The Risks of Being Out Of The Game Are Huge Compared To Being In'

In his 2012 shareholder letter, Warren Buffett delivered a clear message to investors: don't let short-term uncertainty or the predictions of so-called experts keep you on the sidelines. His advice was grounded in his experiences and decades of observing the market's resilience.

"Since the basic game is so favorable, Charlie and I believe it's a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of ‘experts' or the ebb and flow of business activity," Buffett wrote. "The risks of being out of the game are huge compared to the risks of being in it."

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Buffett's example goes back to 1942 when he first purchased stock. The United States was deep into World War II and the situation in the Pacific looked grim. Headlines were filled with losses and uncertainty, but Buffett saw beyond the immediate chaos. He invested despite the dire circumstances, trusting in America's long-term economic strength.

"Each day's headlines told of more setbacks. Even so, there was no talk about uncertainty; every American I knew believed we would prevail," he reflected in the letter.

At the time of his 2012 letter, the U.S. was recovering from the 2008 financial crisis. Yet, Buffett's message wasn't limited to that moment – it was a reminder of the broader historical context. He noted that the Dow Jones Industrial Average had skyrocketed from 66 to 11,497 during the 20th century, an increase of 17,320%. This monumental growth happened despite numerous crises, including the Great Depression, World Wars and multiple recessions.

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This perspective is particularly relevant today, as investors face uncertainties from inflation to global conflicts and tech sector turbulence. Buffett argues that trying to time the market based on short-term fear or so-called expert forecasts risks missing out on the inevitable long-term growth.