Warren Buffett's solid investing advice is just what's needed in this frothy stock market

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OPINION: “Margin of safety,” “keep it simple” and more. As U.S. stocks are now priced at troublingly high levels, remember Warren Buffett’s advice on the fundamentals of investing.

Individual investors are back. Throughout 2021, they directly invested billions of dollars in U.S. stocks and real estate. But these assets are now priced at troublingly high levels, and fears of a correction are feeding volatility. Rising U.S. inflation, taxes, and government debt present systemic challenges. Political and social discord prevail. And there’s COVID.

As unprecedented as these times may seem, from angst to innovation, another Buffett gem reminds us that we’ve been here before. In 2018, Buffett wrote again of how the fundamentals of investing are timeless: The fundamentals of investing are collated in homespun and humorous essays Buffett has been writing for the shareholders of his company, Berkshire Hathaway, for six decades. Since 1996, with Buffett’s support, I have published a collection of the best of these, representing a comprehensive, non-repetitive and compact mini-course useful to any individual investor.

First, Buffett has long said the three most important words in investing are “margin of safety.” He refers to the phrase coined by his mentor, Benjamin Graham, who stressed that investment opportunities arise when priced below value. Buffett purchased the farm from a failed banker, and the building from a government receiver. They were eager sellers offering low prices given market conditions. Hunting for such safety is especially important in current highly-priced markets.

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