“You can’t produce a baby in one month by getting nine women pregnant.” Investment Tips From Warren Buffett
Critics called him a loser due to 2020 being the worst year of returns ever for him. Yet, he’s still the 6th richest person in the world. . .
So I’d rather lose like Buffett than win like RoaringKitty!
Photo From Unsplash --> By Micheile Henderson
I have a feeling that I should clarify the meaning of this quote, in case some Karen comes across it and isn’t capable of connecting the meaning of it to Stock Investing
He’s making a joke/analogy, essentially saying you can’t expect to buy a stock and see immediate returns.
Then, if after a week or so you still haven’t made your fortune, you sell it and buy another Stock. Then another — and another. . .
You see the connection now?
Personally, I thought this analogy was hilarious, considering a humble investor from Omaha who’s been alive for almost a century is the one who thought it up!
Who said Warren Buffett was becoming irrelevant in 2021?
The Oracle of Omaha
Warren Edward Buffett was born on August 30, 1930, and is the 6th richest person in the world. Yes, money doesn’t necessarily mean that the one with it is either skilled or knowledgeable. Yet, I hardly think there’s more than a handful of people in this world that would say Warren Buffett is anything other than smart.
Warren was not a trust fund baby, born to a vast fortune and never having to work a hard day's labor in life. Although I’d be lying if I said he grew up struggling either. His father, Howard Buffett, was a stockbroker-turned-Congressman, so I assume that enabled young Buffett some luxuries in his youth. But this was still the depression era, a time when even the rich weren’t finding life so easy. One did not rise to such high statures as Warren did in those days simply by being the child of someone important.
For example, at 11 years old, he was already buying stocks. One of his first purchases was multiple shares of Cities Service Preferred for $38 apiece. When Buffett was still just a teenager, he filed his first tax return, delivered newspapers, and owned multiple pinball machines which he strategically placed in numerous businesses throughout the town he lived in. By the time he graduated high school, Buffett had already bought a stake in a 40-acre farm in Omaha, Neb.
These are hardly the actions of a spoiled, rich, trust-fund baby who had life handed to him on a silver platter. Think of the things you were doing at that age. I know that I hadn’t even considered the Stock Market or buying an asset like a pinball machine to generate passive income.
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” Warren Buffett
A Business Insider article reported made 99% of his vast fortune after the age of 55. Considering that he’s the 6th richest person in the world and he made 99% of the money after 55, I think it’s safe to say that he made his own stake in history. He wasn’t the type of man to live in the shadow of his successful father, rather, he elevated the Buffett family to the next level.
After researching these things to write this article, not only did some of these accomplishments at such a young age shock, they impressed upon me a very deep and profound respect for the man. Say what you will about the man, but once you read into his life and how he achieved it all, you can’t help but smile.
He also managed to stay humble as his net worth soared to heights that few people, alive or dead, have ever know. Often times when people achieve a social status the likes of Buffett, they can become tyrants and greedy. This was never the case for Buffett. Watch an interview with him and it’s a fact that you can’t deny.
“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.” Warren Buffett
Even if Buffett hadn't been the founder of Berkshire Hathaway Inc.
(BRK-A) or if I didn't know that he's considered one of the greatest investors in history, I'd still make this recommendation to you, based upon the character and integrity that he displayed as a young man: "If you ever somehow find yourself with the opportunity to get financial advice from Warren Buffett, you should shut up and listen."
That's one of the main reasons I'm writing this article. You see, among my generation--Millennials-- as well as the younger, much more rash and tech-savvy Gen-Z, there seems to be this unfortunate view regarding Warren Buffett that he's old, outdated, and full of worthless advice.
That's a travesty we must not let continue to grow!
The YouTube Guru & Their Effect On The Next Generation of Traders
They're already infecting scores of new investor's minds with ridiculous claims, and boasting profits on social media that oftentimes is exposed as fake. These ideas are being planted by predatory people. Typically, they're nothing more than half-assed "YouTube Gurus" who claim to make millions Day Trading, yet most offer no proof or evidence that this is true other than their word. . .
I'm not claiming all of them are liars, in fact, I learned most of what I know from reputable YouTube Teachers. Check out HumbledTraderas she is someone that I truly trust, and can personally attest that she knows what she's doing. Another thing I liked about her is that all of the content that I used, came free of charge.
The Ultimate Irony In This New Trend:
Most of those who I've found to be truly helpful also tend to have free content.
Bottom line: You need to be very selective when choosing your. . .
Mentor I guess would be the correct term?
If you're going to place your trust, (and wallet), in the hands of some guy/gal on YouTube, then you better be sure they are for real.
Always remember this: If they're willing to charge you $100s, maybe $1,000s for their services, then you have the right to ask for proof to substantiate the claims they made regarding their personal capital gains, as well as the returns they promise you as a result of completing their course.
They should have plenty of testimonials from prior students about their overall satisfaction and opinions on the courses and instructors.
Usually, if they are satisfied with the results, they'll also include a few words on how they're performing in the markets now, after the courses, or buying the product/software, as opposed to before.
Ask to see their Tax Returns, or if that's too personal for them, then there are many other ways for them to prove how much they actually earned for a given year in the Stock Market, without revealing sensitive information. They should be willing, even excited to show you their profits.
I mean, why wouldn't they? That would be one hell of a selling point for their course, some of which they charge thousands for.
What’s more, Warren Buffett actually takes his own advice. In 2021, you’ll notice a lot of people telling other’s what they should be doing, then go and do the exact opposite themselves.
The bottom line is to just watch your own back and interest at all times.
You can trust people, it would be unhealthy to think everyone is out to scam you, but as Ronald Regan once said: "Trust, but verify."
Buffett’s take on the average investor & Index Funds
The S&P 500 has delivered average annual returns of almost 10% going back 90-plus years. Better than your savings account, right?
Investing in the market itself is a proven strategy for long-term success without being an expert. For years, the so-called Oracle of Omaha has championed index funds.
Buffett once said: “In my view, for most people, the best thing to do is to own the S&P 500 index fund.”
He’s even instructed the trustee who will be in charge of his estate when he dies to invest 90% of his money into assets such as S&P 500 Index Funds.
That’s how much he believes in the power of owning Index Funds over the long haul.
Photo From Unsplash | By Christian Englmeier
“Someone’s sitting in the shade today because someone planted a tree a long time ago” Warren Buffett
What exactly is the S&P 500 Index?
S&P 500 index funds are mutual funds or exchange-traded funds (ETFs) that passively track the Standard and Poor’s 500 Index. This index represents approximately 500 of the largest U.S. companies, as measured by market capitalization.
This means that the largest companies receive the highest allocation in the index. → Source: TheBalance
Warren Buffett has lived by this mantra his entire life. Does that mean he only invests in S&P 500 Index Funds? No, not at all.
He’s saying that it’s the best approach for the average investor. Regular people like you and me.
By regular people, he’s not implying that we’re stupid or incapable of managing our finances like some ape. He’s simply stating the facts as they are. He’s a professional stockbroker and your a carpenter. This applies to us all, just like how I’m a writer and a front-end web developer, not a Hedge Fund Manager or Licensed Financial Advisor.
Though, for some reason, the careers within the field of Finance seem to be thought of as different by everyone.
It’s hard to explain, but this is the best analogy that I’ve been able to come up with to try to make sense of it all.
If your wife, (or husband), had a heart attack at 3 am, what would you do? Would you yell to the kids to get the kitchen knife and some aspirin, then try to perform open-heart surgery on them? Probably not.
Hopefully, you’d call an ambulance for them to be taken to the hospital.
Once you arrive there, you’ll meet with the doctor, who then goes over what the state of the patient is, what malady or condition they’re suffering from, and what the different courses of action are.
After that, the Doctor will usually tell you what he thinks is the best course of action to take. Many times the choice is out of your hands, (it’s not a perfect analogy, I know), but often enough, you as the spouse or Power of Attorney have to make the ultimate decision.
Say, unfortunately, they slipped into a coma or end up on life support. You have to decide which course of action you want the doctor to take!
Pull the plug? Perform a dangerous, but perhaps life-saving surgery?
Maybe there’s some new medication or treatment that just came out, one that may save their life but has yet to be fully approved by the FDA, thus there are many unknown risks.
The doctor lays out all the options to you and what he thinks is the best approach, but ultimately, in the end, you’re the one who decides what happens.
Then you step back, letting the doctor perform his duties.
That sounds like a pretty stressful situation, huh? All those decisions you have to make, all the while knowing that the outcome of those decisions carries the possibility of life or death.
Thank god you have that trained, professional Doctor there with you. They have been able to fully explain the potential outcomes of the different scenarios, what the success rates have been from the past patients, etc.
He’s been around the block a few times. Performed more than his share of surgeries. I mean, this person has undergone 12 years of school, then a very long residency to turn that knowledge into real-life experience. Typically, most people end up taking whatever recommendation the Doctor thinks is best.
With Doctors, Lawyers, Mechanics, pretty much anyone who’s an expert in their field, we have 0 issues with taking their advice.
Financial Advisor’s on the other hand. . .
With them, we’ll sit there while they're explaining how bad the current state of the economy is, and the potential danger it’s exposing your retirement account to, and what will we do?
Half of the time we’ll just shake it off, thinking that whatever’s going on is a fluke and everything is fine. We ignore their pleas for us to listen to reason, then proceed to tell them the game plan and how we want to proceed.
It’s sort of madness when you think about it, right?
Imagine telling the Doctor: “Don’t worry, this wasn’t a heart attack.” It’s just a bad case of Agida, he’ll be fine after some rest and a bottle of Pepto Bismol.”
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” Warren Buffett
Why are index funds so popular?
The S&P 500 index funds tend to be among the most popular of them. Some other popular ones are: Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), Schwab S&P 500 Index Fund (SWPPX)
Here are a few reasons why they're so popular among investors.
Attractive returns — The S&P 500 will fluctuate from year to year, just as any other investment or stock. But if you take the average return over time, generally you’ll expect to see a 10% return per year with an S&P Index Fund. That’s not saying you’re guaranteed to make money every year, but it’s still one of the safest bets you can make.
Diversification —When you buy into an Index Fund, it eliminates the worry over wondering if you picked the right stock or not. Index Funds don’t just represent one sector either, so you gain exposure to many different industries. So, rather than picking individual stocks, you get exposed to a large variety. One share of an index fund represents hundreds of companies.
Lower risk — Due to the fact that you have such a variety of stocks, the inherent risk is reduced tremendously when you buy a share of an Index Fund over individual stocks. If you buy individual stocks and something happens to the company whose stock you own, all your money could be lost in a very short period of time. Index Funds protect you by keeping each of your eggs nestled safely in its own basket.
Low cost —Since most of these funds just follow the broad market, (like the S&P 500), there’s little management required after they’re set up, making the cost very cheap, sometimes free. With some of the bigger Funds, you may need to pay a small $5-$10 fee per $10,000, per year. But that’s nothing compared to fees of an actively managed Mutual Fund, especially when you consider that they rarely beat the 10% average returns of the standard index funds.
Even with the clear benefits of Buffett's suggestions for the average investor put right under their nose, some pundits still claim that his age-old advice to "buy and hold index funds for long term" is outdated.
Does this sound like the view of an old, humble, outdated investor:
“The best thing that happens to us is when a great company gets into temporary trouble… "We want to buy them when they’re on the operating table.” Warren Buffett
I do understand he’s getting old and his mantra of never investing in a company he doesn’t fully understand is starting to limit him in ways. Yet, he himself has admitted as much, stating that he missed out on good opportunities like Amazon, Netflix, Roku, etc.
By the way, do you know what he did as a result of these missed opportunities?
He adjusted accordingly to the times that are always shifting. Recently he stated that one of the best and largest investments of Berkshire Hathaway is their 5.4% stake in Apple (AAPL).
While he was being criticized the past few years for “not being aggressive enough”, Berkshire sold a record amount of stock, pushing their cash reserve pile up 5.4% to roughly $145.4 billion. That’s almost a record amount of free cash flow on hand for the company.
Do you know what that sounds like to me?
It sounds like a company that’s dumping off losers who are no longer making the cut and positioning themselves with a massive amount of cash, waiting for the next opportunity to reveal itself.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” **Warren Buffett
Does the name Snowflake Inc. (SNOW) ring a bell? It should, considering it was one of the largest IPO’s ever in history. This was the headline from the first article in the ist that came up when I Googled Snowflake, just now:
Snowflake shares more than double. It’s the biggest software IPO ever!
Sure doesn’t sound like the typical IPO some oldtimer who’s out of touch with the new generation would be the main sponsor of. Yet, he saw the value there when many others didn’t.
Here’s a clip from an article by the Economic Times.
Despite a 40 percent rally in US markets. . .
Buffett is still the biggest loser for Calendar 2020 among the world’s biggest billionaires.
As per Bloomberg Billionaires Index, the wealth of Warren Buffett, Chairman of Berkshire Hathaway, has shrunk by about $19 billion (approximately Rs 1.4 lakh crore) this year. But he still remains the sixth richest person in the world with a net worth of $70.4 billion.
Wait, Buffett did what?
I hope that reminds people of a very important fact. Even though Buffett had a bad year, (like everyone does from time to time), he’s still the 6th richest person in the world!
So, to the haters I say:
I’d rather lose like Buffett than win like RoaringKitty. . .
Just saying. . .
Don’t get it twisted, I love this RoaringKitty guy and what he accomplished. The GameStop Short Gamma Squeeze was an impressive feat. It was immensely satisfying to watch him prove to the Wall Street Elites that everyday folks like you and me can win too.
Not just people like Jeff Bezos and others who have net worths larger than some small countries.
As for Buffett being cautious during last year’s massive Bull Market. . .
“The fact that he was more cautious was perfectly fine,” said Pollock, a portfolio manager at Cheviot Value Management LLC, which counts Berkshire as its largest holding.
“It’s better to miss an opportunity and remain in great financial condition than it is to take a large swing, and swing and miss and strike out.” Read the full story here.
Here are some shocking examples of how hard it is to “beat the market”
Harvard Finance Grads and some of the Top Fund Managers on Wall Street couldn’t beat the average annual returns of blindfolded Monkeys, according to this Wall Street Journal article.
Then you have. . .
Warren Buffett’s $1 Million bet with Wall Street’s Top Fund Managers. Buffett bet them that they couldn’t beat the average return of the S&P 500 Index Fund. This should've been a simple task for them, considering it’s their entire business model. They run Mutual Funds, which can cost a lot to invest in because they supposedly “beat the market” by actively trading your assets, rather than letting them sit like an ordinary Index Fund.
I actually wrote one about these events myself, here's the link if you're interested — Bufffetts Million Dollar Bet & The Moneky Experiment.
I go a little deeper than the events themselves, getting into what this all means for average investors like you and me.
The Conclusion
I guess that will depend on who reads this, and what their individual opinions are towards investing. Contrary to the entire article I just wrote, I am actually an active investor.
Although I have no delusions of being able to quit my day job and make my fortune this way. I continue to learn and do it mainly as a hobby. I’d rather try Day Trading Options than play the lottery or go to a casino. The odds seem better that way.
Plus, I’ve been getting better over time and learning a lot about investing in general. Not to mention that I got very lucky with a couple of Options Trades, which is the worst thing that could have happened to me.
Now I’m hooked.
Anyway, learning about finance and how investments work is the type of knowledge that everyone can benefit from learning. It doesn't matter what career path you're on, knowing how to manage your own finances will help you out in life tremendously.
This article didn't seem so long when I wrote it on my Medium Publication
Although, I guess that's what happens when editing past mistakes on already published articles consumes you. . .
I’ll end with two quotes from The Oracle of Omaha himself, Mr. Warren Buffett.
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.”
— Quotes by Warren Buffett
This article was originally published on my Medium blog---> As well as my Medium Publication: The Self Hack
I'm always looking for new writers on my Medium Publication. Although, these days I mainly use it to promote my Steemit Blog, and the Steemit Community as I believe it to be much better than Medium and the future of blogging. If you're interested in helping me spread the word about Steemit on my Publication, check out the Submission Page on The Self Hack for more information on how you can contribute. You can be added as a writer, or, if you're interested and have the willingness to help and the required knowledge, I'm also in need of Editors as well. I actually get good traffic on the Publication, so you will be compensated for the amount of work/traffic you bring to the platform, but mainly you'll be rewarded with plenty of traffic back to your Steemit Blog.
By Steven Tyler on June 5, 2021.
Canonical link
Exported from Medium on June 14, 2021.