In One Chart: Here’s Warren Buffett’s ‘strongest argument’ against buying stocks with borrowed money

Warren Buffett is no fan of using leverage to enhance investing returns. In this year’s annual letter to Berkshire Hathaway shareholders, released Saturday, he offered the table below to illustrate why:

The table shows the four “truly major” dips that shares of Berkshire BRK.A, +0.87% BRK.B, +1.01%  have suffered over the last 53 years, Buffett notes. Berkshire over that time has built value by reinvesting earnings and letting compound interest “work its magic,” Buffett said. And while Berkshire has moved forward year by year, it wasn’t immune to the “gory” episodes portrayed above.

See: Warren Buffett’s annual letter to investors

“This table offers the strongest argument I can muster against ever using borrowed money to own stocks,” Buffett wrote.

“There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary,” he said. “And an unsettled mind will not make good decisions.”

Read: Deal-crazed CEOs are like oversexed teens and other highlights of this year’s Buffett letter

Shares of Berkshire—just like the broader market SPX, +1.60% —will inevitably experience similar declines over the next 53 years, Buffett said, adding that no one knows when they will happen.

“When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt,” he said.

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