Last month, I had the opportunity to travel to Omaha, Neb., for the annual shareholders’ meeting for Warren Buffett’s company, Berkshire Hathaway. So what did I learn (besides the need to pack a blue blazer next year to fit in better with all the investment folks)?
At age 83, Warren Buffett is still mentally sharper than the vast majority of professional investors, which gives hope to all of us that 20 (or 50, in my case) years from now, there’s no reason not to continue to pursue what you love the most and do best.
Buffett and his partner, Charlie Munger, spent most of the day answering questions from shareholders and reporters about various aspects of the business and their opinions on topics ranging from financial literacy for children (it’s the responsibility of parents) to the state of the economy (better than you think).
Despite his demonstrated investment prowess, Buffett commented several times on the difficulty inherent in investing and the benefits of using low-cost index funds. In particular, he admitted that he’s never been able to figure out the bottom of a stock market decline (including 2008-9), which raises serious questions about whether anyone else can do this consistently.
In regard to using low-cost index funds, Buffett has put his money behind his recommendations. He has instructed that upon his death, 90 percent of the money left for his wife should be invested in a S&P 500 index fund. Buffett also provided an update on a 10-year wager he made at the beginning of 2008 with a group of hedge funds (supposedly the best of the best) that the S&P 500 would beat them. So far, he’s been right, based on the 12.5 percent return for the hedge funds versus the 43.8 percent for the S&P 500.
Perhaps the best takeaway was not necessarily something new, but rather an affirmation that the basic reason for investing in stocks is to be an owner of a company. This requires a long-term perspective and patience, as owning stocks is less about getting rich quick and more about sharing in the growth of businesses and the economy.
Larry Swedroe takes some of Buffett’s investing principles and expands upon them with a comprehensive investment strategy in his book “Think, Act, and Invest Like Warren Buffett,” which I highly recommend for its ease of reading. While its 134 pages bypass many of Buffett’s strategies, the book provides an excellent primer for someone looking for a place to start.