Warren Buffett's investing dos and don'ts

Warren Buffett's investing dos and don'ts
Whether you're a home buyer considering a mortgage, or an executive weighing a takeover, the 85-year-old billionaire has advice for anyone looking to live a more rational, financially successful life.
MAR 09, 2016
By  Bloomberg
For anyone wondering, “What would Warren Buffett do?” the 85-year-old billionaire has given plenty of advice in his public remarks and in annual letters to Berkshire Hathaway Inc. shareholders. It doesn't matter whether you're a home buyer considering a mortgage, or an executive weighing a takeover; he's got something for just about anyone looking to live a more rational, financially successful life. There's also a growing catalog of no-nos that Mr. Buffett has handed down to help investors, corporate managers and his own employees avoid mistakes. Here is a review of “What Buffett wouldn't do” — and you probably shouldn't, either. INVESTING Don't be too fixated on daily moves in the stock market: "Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays." (from letter published in 2014) Don't get excited about your investment gains when the market is climbing: “There's no reason to do handsprings over 1995's gains. This was a year in which any fool could make a bundle in the stock market. And we did.” (1996) Don't be distracted by macroeconomic forecasts: “The cemetery for seers has a huge section set aside for macro forecasters. We have in fact made few macro forecasts at Berkshire, and we have seldom seen others make them with sustained success.” (2004) Don't limit yourself to just one industry: “There's no rule that you have to invest money where you've earned it. Indeed, it's often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can't for any extended period reinvest a large portion of their earnings internally at high rates of return.” (2008) Don't get taken by formulas: “Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas.” (2009) Don't be short on cash when you need it most: "We will never become dependent on the kindness of strangers … We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity." (2010) Don't wager against the U.S. and its economic potential: “Who has ever benefited during the past 238 years by betting against America? If you compare our country's present condition to that existing in 1776, you have to rub your eyes in wonder … We will regularly grumble about our government. But, most assuredly, America's best days lie ahead.” (2015) MANAGEMENT Don't beat yourself up over wrong decisions; take responsibility for them: "Agonizing over errors is a mistake. But acknowledging and analyzing them can be useful, though that practice is rare in corporate boardrooms ... When it comes to corporate blunders, CEOs invoke the concept of the Virgin Birth.” (2001) Don't have mandatory retirement ages: “At the Harvard Business School last year, a student asked me when I planned to retire and I replied, 'About five to 10 years after I die.'” (1992) “Don't ask the barber whether you need a haircut” because the answer will be what's best for the man with the scissors. A CEO is no more likely to get an impartial opinion if he asks outside advisers whether to proceed with a deal, as “friendly investment bankers will reassure him as to the soundness of his actions.” (1983) Don't dawdle: “When a problem exists, whether in personnel or in business operations, the time to act is now … The time to have considered — and improved — the reliability of New Orleans' levees was before Katrina.” (2006) Don't interfere with great managers: “At Berkshire, we do not tell .400 hitters how to swing.” (1994) Don't succumb to the attitudes that undermine businesses: “My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency. When these corporate cancers metastasize, even the strongest of companies can falter.” (2015) Don't be greedy about compensation, if you're my successor: “It's important that neither ego nor avarice motivate him to reach for pay matching his most lavishly-compensated peers, even if his achievements far exceed theirs.” (2015) “Don't worry about my health,” because so much of the company's success is tied to reinsurance lieutenant Ajit Jain. “Worry about his.” (2001)

Latest News

Farther debuts AI investment proposal tool for advisors to win clients
Farther debuts AI investment proposal tool for advisors to win clients

"Im glad to see that from a regulatory perspective, we're going to get the ability to show we're responsible [...] we'll have a little bit more freedom to innovate," Farther co-founder Brad Genser told InvestmentNews.

Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler
Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler

Former advisor Isaiah Williams allegedly used the stolen funds from ex-Dolphins defensive safety Reshad Jones for numerous personal expenses, according to police and court records.

Are you optimally efficient?
Are you optimally efficient?

Taking a systematic approach to three key practice areas can help advisors gain confidence, get back time, and increase their opportunities.

Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida
Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida

Meanwhile, Osaic lures a high-net-worth advisor from Commonwealth in the Pacific Northwest.

Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B
Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B

The deals, which include its first stake in Ohio, push the national women-led firm up to $47 billion in assets.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.