Warren Buffett’s investing advice sounds strange, yet you’re more like him than you think
Proposing that one can invest in a manner akin to Warren Buffett may seem implausible. The individual has demonstrated remarkable compounding abilities, transforming an initial dollar investment at the onset of his professional journey into approximately $365,000 in the present day. Buffett’s formidable intellect, extraordinary patience, and extended tenure—during a particularly advantageous period for U.S. equities—render it virtually unattainable for others to replicate his achievements.
However, in contrast to professional investors, it is significantly simpler for a touch of that enchantment to influence your portfolio. Buffett’s approach has never centered on the pursuit of immediate profits; rather, it emphasizes that everyday investors can also engage in the same long-term strategy. The reality that Buffett was not a portfolio manager, in the strictest sense, following the late 1960s afforded him remarkable autonomy. He made focused investments in companies such as Coca-Cola and Apple. He dismissed the naysayers who claimed he had lost his touch, particularly during the tech bubble. He shrugged when ephemeral managers such as Cathie Wood were celebrated as the “new Warren Buffett.”
The trajectory has not been a linear ascent. Throughout his six-decade tenure leading Berkshire Hathaway, Buffett has underperformed the market in a third of the instances and experienced financial losses in 11 years. It undoubtedly troubled him, yet to a significantly lesser extent than it would a professional fund manager confronting career jeopardy. Similarly, he was never subjected to the pressure of owning the Nifty Fifty, Cisco, Nvidia, or other trendy stocks.
It is widely recognized that 90% of mutual-fund managers will underperform their benchmark over a ten-year period. It is less recognized that investors in these funds experience even poorer performance, lagging behind their returns by an average of 1.1 percentage points, as reported by Morningstar. Conversely, a value-stock portfolio—those in the waters where Buffett has fished—has outperformed the broad market by an average of 2.7 percentage points annually over the decades. Not only do you not have to yield to the pressures encountered by the professionals. One may also consider purchasing and retaining the less exciting stocks, or index funds that encompass them, while disregarding the market’s trends and fluctuations.
Imagine two 21-year-old college graduates who each set aside $3,000 annually until they reach the age of 65. One yields to common emotional-timing mistakes and the tendency to chase returns. The alternative only accounts for half of the long-term value premium that bolstered Buffett’s returns (it isn’t what it used to be). Assuming a market return of 8% for a stock-and-bond portfolio, the typical investor would possess $835,000. One who permitted a measure of Buffett’s patience and teachings to influence her portfolio would find herself with $1.75 million on retirement day.
Berkshire’s retiring CEO has not only been a titan in the realm of professional investing—he stands as a colossus among the diminutive. While you may not reach the heights of Buffett, emulating even a fraction of his approach can position you significantly above both professionals and your peers.
