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Friday, March 14, 2014

What Buffett Didn't Say

OK, so there is a buzz going around about Warren Buffett's advice in his will to the trustee on how his money should be invested.  See

The Warren Buffett Guide to Retirement Investing by Robert Berger.

Some seem to express surprise that Buffett suggests his assets be invested in a low-cost index fund.

All I can say is those who are surprised haven't been paying attention because Buffett has consistently said  over the years on numerous occasions that most investors, including those that invest for the nation's largest pension funds, should invest in low-cost well-diversified funds.

To be perfectly clear, it is worth emphasizing what he didn't say.  He didn't say that the trustee should do a meticulous search and hire a consultant to analyze investment performance and methodology of the top investment managers, including the much-touted hedge fund gurus.  He didn't say that the search should include the top stock pickers, market timers, and chartists who loudly proclaim that their analytical powers are akin to a crystal ball that clearly divines future prices better than the millions of investors setting prices today.
His prowess in the market has come from a deep understanding of value, unrivalled patience, and, yes, a willingness to bailout sticky situations on extreme penalty terms.  It has come from being in a position to restructure boards of companies bought to cut out the deadwood and enable value to flourish.

Again, why not find someone of the same ilk?  Along the same lines, I wondered why, when Michael Jordan came to the Washington Wizards, he didn't try to bring in someone who could take off from the foul line and dunk a basketball, hit a 25-foot jump shot with a championship on the line when all 5 players on the other team knew he was going to take the shot, and break his record 10 seasons of achieving the NBA scoring record.

Legends know how hard it is to do what they have done.

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