What Would Buffett Buy?

23Jun08

If you are an investor you should know who Warren Buffett is. Shame on you if you don’t know about him. For those of you who don’t know, I suggest wikipedia’ing him. If you want throw $100 bills in the air and not care (see photo above), you must be Warren Buffett.

Words of Wisdom

“Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds” – Warren Buffett

Buffett’s reasoning is simple. Mutual fund managers usually can’t beat the market. If they do, usually the fee’s on the funds are so high you end up under-performing the S&P. To prove this, Buffett has actually challenged hedge-fund managers, by placing a bet that his index funds will outperform their actively managed fund. Check it out here.

“I would just have it all in a very low-cost index fund from a reputable firm, maybe Vanguard. Unless I bought during a strong bull market, I would feel confident that I would outperform…and I could just go back and get on with my work.” – Warren Buffett

Ah, the wisdom of a multi-billionaire. Investing should be simple. When you are young investing shouldn’t be your first priority, your job is what is going to make you the most money, and allow you to contribute to your investments. Check out the full article here.

Summary

Can you outsmart the world’s greatest investor who has over 50 years of experience managing a portfolio? I would stick to the odds that are in my favor and go simply index. See my articles on how to construct a fully indexed portfolio.

PS. Inspired by WB, I rocked the yellow sweater vest to work today.

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2 Responses to “What Would Buffett Buy?”

  1. 1 cidory

    Americans want it all right now, they want to invest to and get paid tommorrow

  2. Perhaps you are falling for the oldest sales pitch there is; Straw Man argument? Don’t want to sound to pedantic, but Buffett was comparing investing in index funds versus actively managed funds. Given that comparison he is giving absolutely sound advice. But it that the right comparison? I argue no. In the universe of possible investments there are much more opportunities than just those two. Perhaps even invest in Berkshire Hathaway itself? I mean he has a 21% rate of return over 43 years. Where you going to beat that? Perhaps the right comparison is Index Funds versus Berkshire Hathaway???? Now where do you invest?


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