Warren Buffett’s one-sentence for investor success
When it comes to investing one man knows more than most, and that man is Warren Buffett.
In a Recent interview Buffett had some very simple advice to pass on to investors and potential investors. Buffett said “All you have to do is just buy a cross-section of America and then never listen to people like me or read the papers or do anything subsequently.”
Buffett recommended that to capture the “cross-section” you would need to invest in an S&P 500 index fund like Vanguard 500. Buffett himself once made claims that the Vanguard founder and index fund pioneer Jack Bogle was a hero to investors, and potential investors alike. Anyone who has queries about this potential investment should look at the historical data we have at hand. S&P500 index funds have a very long history of outperforming some of the most actively managed Hedge funds, whose main aim is to beat the index. In a ten year long bet against the Hedge Fund industry, Buffett came out strong and proved the difficulty that is beating the S&P 500.
Buffett also added that just because you can trade in and out of something it doesn’t mean that you should do it. He compared it to property investments, saying “you buy a farm, a house or apartment, you can’t just re sell it tomorrow” however one of the ways that shares and stocks are unlike the housing market is the transaction costs of jumping in and out are extremely low. “The price you pay to trade stocks is a nothing compared to other investment strategies, and because they have the ability to easily move around, they do. But moving around constantly is not always smart when it comes to investing.”
There have been hundreds of articles and posts showing how the average investor is terrible when it comes to timing the markets, Buffett said “Unless you are working with a reputable company with a good history of positive results, as an investor you just wouldn’t know when to move.” Often it seems that investors are selling when they should be buying and vice versa. With that in mind they will end up generating returns much lower than they would be had they has a steady hand to guide them. Warren Buffett has also recently been praising the banking industry and how they are, as he believes solid long term investments which most investors should have in their portfolio.
Graham Chan – IEC International