Updated: Nov 5, 2020
Besides articles that feature numbered lists, one of the biggest clichés I run across on a weekly basis are articles about business and investing lessons we can learn from Warren Buffett. The internet is full of them. What is he investing in now? What were his comments at Berkshire Hathaway’s last annual shareholder meeting? What is his most recently expressed opinion on the world’s state of affairs? “And what is wrong with that,” you ask?
Don’t get me wrong, I am interested in the Oracle of Omaha, how he operates, and what he is up to. What is not to like about someone who is very good at what they do? Or, in Mr. Buffett’s case, the very best at what he does? And his quippy remarks and anecdotes are certainly entertaining and usually contain some small gem for his listeners to peruse. That being said, how applicable is his advice? Should we, as non-billionaire investors, hang on every word and action?
Therefore, partially in jest and in only mild seriousness, here is my numbered list on why you should not try to imitate Warren Buffett and what he does.
Reason #1: You are not a billionaire.
(If you are a billionaire, I might suggest you move on to other reading material.) When money is a substantially more limited resource to you, it is going to affect your priorities. I’m talking about a budget. Billionaire’s have budgets, but they look different. Instead of listing funds for a next targeted business takeover or activist investment position, you have line items for more basic needs of life. If you truly want to run your life like a wealthy individual, stop pouring over articles speculating and prognosticating on Mr. Buffett’s next move. Start mulling over your budget, cutting costs, and saving money on non-essentials.
Reason #2: You are not the CEO of a multi-national conglomerate.
Much like reason #1, not being at the helm of a multi-national corporation with a multi-billion dollar budget places you in a different boat. Even if you are a business owner, it is unlikely that you have to deal with the some of the same issues like currency exchange rates and navigating the legal and political environments of other countries. What constitutes a good decision for Berkshire Hathaway does not mean you should follow suit. What you can do, though, is utilize good capital budgeting and management techniques. These apply whether you are managing what you have personally accumulated or if you own and manage a business.
Reason #3: Warren Buffett’s buy-and-hold is different from your buy-and-hold.
One of the most annoying and misapplied (in my opinion) pieces of advice from the fabled investor is the “buy-and-hold” strategy. I certainly agree that there is very little added value garnered from hyperactive trading strategies (at least for the average investor). However, do not for a moment believe that Warren Buffett buys a business and then forgets about it. Many businesses end up being wholly owned by Berkshire Hathaway, or at least enough is purchased to have a controlling interest in the business. This gives him the ability to at least have a voice in how the business is run, or in some cases completely overhaul and restructure the business. If you are reading this, you are probably not the same type of “buy-and-hold” investor. Investments should not be purchased and forever forgotten. Do your due diligence, and continue to monitor and review your holdings.
Reason #4: He is not in the business of giving you personal advice.
As touched on before, Warren Buffet’s many quips and anecdotes have little lessons built into them that offer many great insights into the markets. These are not meant to be taken, though, as individually tailored tips and advice to you. What is more, acquisitions and speculative acquisitions by Berkshire Hathaway should not be taken as an investment recommendation to you personally. Which leads to my final reason you should ignore Warren Buffett…
Reason #5: If you want in on a Warren Buffett deal, consider doing the obvious.
If you really are that big of a fan and want in on exactly what he is doing, save yourself some time, stop reading the hundreds of articles out there like this one, and consider buying the stock. Berkshire Hathaway trades under the tickers BRK-A, or for the less fortunate fanfare, BRK-B. See below comments for the necessary regulatory disclosures.*
I hope my numbered list has been helpful, or at least entertaining, and that I have cured any addiction to Warren Buffett advice articles! If not, the main gist I am trying to get across is this: as an investor, saver, business owner, etc., it is important that you develop your own unique strategy, unique to your own particular beliefs and situation, and unique to your own particular needs. Do your due diligence that goes beyond superficial reading, or enlist the help of someone qualified to help you do your own due diligence, develop a strategy, and then execute it with discipline. Happy investing!
*The author does not hold positions in either security listed. All investing involves risk, including loss of principal. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.