I’m not a big Warren Buffett fan when it comes to politics. In fact, I think he could have been more enthusiastic about Berkshire Hathaway’s $29 billion tax cut windfall, but his annual letter is a must-read; there are a couple of points every investor should take to heart:
Investing Isn’t a game of Monopoly
Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their “chart” patterns, the “target” prices of analysts or the opinions of media pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be) our investments will be successful as well. Sometimes the payoffs to us will be modest; occasionally the cash register will ring loudly. And sometimes I will make expensive mistakes. Overall – and over time – we should get decent results. In America, equity investors have the wind at their back.
Berkshire Hathaway Annual Letter
I also think there are so many things wrong with the way the media and even Wall Street discusses investing and measuring success. I don’t like using the calendar year as a magic line (where we start over like collecting $200) and going back to “Go.” And while there is value in charts, it’s nuts that long- term investors would only rely on patterns rather than fundamentals.
Share price targets only point to the potential at the time an opinion is written. The underlying factors will change day to day, which makes those targets irrelevant. I’ll keep using targets because investors can’t seem to move off the mark without them, but it’s all about monitoring and measuring macro and micro factors, and how management navigates them to advantage the company and its shareholders.
To read his full report, click on this link
Smartest Guys in the Room?
In 2007, Warren Buffett made a ten-year “bet” that he could do a lot better eschewing big-time hedge funds with their extraordinarily high fees (20% of profits and 2% administrative fees), and just investing in the market (S&P 500).
As it turns out, he was right. Over that period, the S&P 500 climbed 125.8%, while the best fund increased 87.7%, and the worst only 2.8%. These are the smartest guys in the room, the Pharaohs of Wall Street.
I think do-it-yourself investors need help like the kind we provide, but they should be engaged and never just fork over hard-earned cash to be scattered in a bunch of funds that probably will underperform.
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