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Thursday, May 2, 2019

Warren Buffet's Advice

In the last post I presented Warren Buffet's often repeated advice to the average investor to invest in low cost index funds. He simplifies and recommends an index fund tracking the S&P 500.

This got me to recalling a recent post on LinkedIn about an Uber Driver who got advice from his passengers. He asks his passengers for the one message in life that they would suggest and then he asks them to write it down for him. He then says he plans to publish the "life suggestions" in a book.

Well, as you might imagine this got a terrific response with many people stating they couldn't wait to read the book! Many responders thought this a novel idea.

To be clear I am all for sharing life living advice especially from those with the experience  of decades manuevering  the pitfalls of the free market capitalistic  hyper-charged consumer driven U.S. economy.

Circling back it is interesting to recall Buffet's advice. After all, this is the advice from the premier investor of our age and has embedded in it the key to a successful retirement for the last 25 to 35 years of our life! You would think that every high school in the country would present this as worthy of consideration for young people. Good luck finding it in a single economics curriculum.

But, given Buffet's investment prowess, why wouldn't better advice be to invest in his company? Well, let's take a look at his record:

                                   YTD     1-yr     5-yr     10-yr     15-yr     20yr
Berkshire Hathaway   4.1%    7.9%   10.8%  13.7%    8.5%    7.7%
S&P500                     17.5%   13.1%  11.7%  15.3%    8.7%    5.9%
(reported in Barron's  from Bloomberg, 4/29/2019, p.16)

As shown he has underperformed from 15 years on in,  weighed down by the tremendous size of Berkshire Hathaway and the significant cash position he holds.

So, to me the bottom line is this: few know as well as Buffett how difficult it is for the average investor to beat the market. His advice to stick with a low cost index fund is worth heeding. That's what I would tell the Uber driver.

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