Do people listen to Buffet

[sss555sss]

Hi, so I am wondering if semi-professional investors (because this is what we aspire to be) listen to Warren Buffet and factor his advise when making investments.

The source of this question is the following. I hear a lot of people online quoting him and following his investment strategy. While he does say a lot of things which are factual and correct, the investments strategies which he gives are not correct IMHO. There is a lot of people I meet who seem to have followed him and have incurred a bunch of losses with the "stick to your guns" strategy when in fact you should "use your brain" is a better strategy. You shouldn't wait for a company to fall 50% to sell - you should have registered the fundamentals are falling and have sold way before. I just don't know if people realise that most of what he says should come with a massive disclaimer that says "Do this if you are as rich as I am". If you are not a billionaire, a 50% loss is a change of lifestyle for you, not for him. I'm genuinely wondering if people try to imitate him and if they understand how wrong this is?

I don't suggest people trade frequently to capture alpha like a hedgefund, but what I am seeing is people justifying not getting out of a losing position, because of Buffet's advise. This is wrong. Stop. Think. Sell if you have to. Sometimes selling is the correct action. It's OK, you can buy it back tomorrow or after. Derisk if you think you are carrying too much risk.

[Itsallaguess]

If you are not a billionaire, a 50% loss is a change of lifestyle for you, not for him.

I'm genuinely wondering if people try to imitate him and if they understand how wrong this is?

I'd suggest that if a 50% loss on a single investment could deliver a 'change of lifestyle', then that's a problem that should be parked right at the feet of the investor who's chosen to run with that level of asset-allocation, and not Warren Buffett..

Cheers,

Itsallaguess

[Dod101]

Warren Buffett has as everyone knows been a highly successful investor over a very long period and his Shareholder Letters over that period contain a huge amount of great general investing advice so to that extent following his general investment principles is a good idea. Today though he seems rather out of date and certainly is invested in the 'old economy' and his holdings are to me probably too numerous and diverse to get much further without a lot of pruning. To ignore the advice of Warren Buffett is though giving yourself a disadvantage before you start. I am not writing about his tactics but the general principles of investments which he espouses and writes about.

As for the effect of a 50% loss. I am not sure if you are referring to a 50% loss per investment or over the whole portfolio. If the latter it might be a change of lifestyle but if the 50% loss is in any one holding then as IAAG says you ought to be diversified sufficiently to be able to withstand that.

A LTBH strategy which is what many successful investors including Buffett follow is generally regarded as a highly successful one for most amateur investors and indeed for many professionals, including the more successful ones. See someone like Nick Train but you need to buy excellent or at least above averagely good companies to begin with.

This is though a huge subject and books have been written on it.

Dod

[johnhemming]

(because this is what we aspire to be)

Although this forum is substantially a forum for people who are private investors many of whom depend upon investment income (in the same way as many people rely on pensions) I would not say that this means people are paid by others to make investment decisions (ie professional investors)

You shouldn't wait for a company to fall 50% to sell - you should have registered the fundamentals are falling and have sold way before.

I agree with Buffett that there are often situations where the market gets things wrong. I personally have held stocks that have fallen say 50%, but have not sold them and potentially bought more. Although I sometimes lose on investments over all I make gains. If I simply sold because a stock has fallen in market price I would have lost quite a bit of money.

When a share that I am interested in moves in price I look where possible to find out why. I then decide whether I think the market is right about this.

Very often the market over reacts to situations.

[Bubblesofearth]

Hi, so I am wondering if semi-professional investors (because this is what we aspire to be) listen to Warren Buffet and factor his advise when making investments.

IIRC Buffet's advice to most private investors is to buy a low-cost tracker.

BoE

[TUK020]

Hi, so I am wondering if semi-professional investors (because this is what we aspire to be) listen to Warren Buffet and factor his advise when making investments.

IIRC Buffet's advice to most private investors is to buy a low-cost tracker.

BoE

I think he shared his advice to his wife for after he had gone - 90% low cost tracker, 10% cash buffer

[SalvorHardin]

Hi, so I am wondering if semi-professional investors (because this is what we aspire to be) listen to Warren Buffet and factor his advise when making investments.

The source of this question is the following. I hear a lot of people online quoting him and following his investment strategy. While he does say a lot of things which are factual and correct, the investments strategies which he gives are not correct IMHO. There is a lot of people I meet who seem to have followed him and have incurred a bunch of losses with the "stick to your guns" strategy when in fact you should "use your brain" is a better strategy. You shouldn't wait for a company to fall 50% to sell - you should have registered the fundamentals are falling and have sold way before. I just don't know if people realise that most of what he says should come with a massive disclaimer that says "Do this if you are as rich as I am". If you are not a billionaire, a 50% loss is a change of lifestyle for you, not for him. I'm genuinely wondering if people try to imitate him and if they understand how wrong this is?

As Bubblesofearth has pointed out, Buffett's advice to the typical private investor is to buy a low cost index-tracker, not "stick to your guns".

Buffett doesn't operate a "stick to your guns" strategy when it comes to Berkshire Hathaway's stock market investments. His strategy is more accurately described as "buy businesses with a strong economic moat, sell when the moat is weakened permanently". He also occasionally invests in businesses where there isn't much of a moat, but where the market has seriously mispriced the shares (this happens from time to time, markets are not always efficient). This is the strategy that I use and it's worked out pretty well for me so far.

Buffett does run a "don't sell" strategy with Berkshire's subsidiaries which he has bought. In large part this is because of promises made at the time of acquisition that businesses will not be traded like collectable cards. This promise in turn means that a lot of owners are more comfortable in selling their businesses to Berkshire rather than private equity firms.

You are making a massive assumption about people's lifestyles if you think that a 50% fall forces a change in lifestyle unless they are a billionaire. I retired 17 years ago, live off my investments and have no other source of income. A 50% loss of my entire portfolio has zero effect on my lifestyle (this actually happened to me in 2008). So a 50% loss in a single investment has even less effect. It's called "living well within your means".

I did once have a 50% fall in an investment a few days after I bought it. The company was the oil explorer Soco International and the reason for the fall was predominately down to a newly appointed fund manager dumping his fund's holding in Soco, not due to any deterioration in Soco's business. Being a fairly illiquid stock Soco's price was hammered. Soco ended up being my most profitable investment ever, making over 2,400% on my total investment some six years later.

[Hariseldon58]

There is a danger of selectively quoting Buffett and attempting to apply the advice out of context or out of the time frame...

It's a brave comment to say that Buffet has investment strategies that are not correct, similar things were said about him in the late 90's....

(It's presently knock Buffet season, I sold out of Berkshire Hathaway last year at around the $200 mark and I am happy to have bought back around the $176 level recently.)

With respect to the "stick to your guns strategy" you will note that he dumped all his airline stocks pretty quickly when he felt the facts changed.

I'm with SalvorHardin, if you invest over a lengthy period, then a 50% fall will occur, I've had 2 such events 2001-2003 and 2007-2009, 13 years of living off investments ( deduct 13 years from 2020 and the the last major fall was inconvenient...) one lives within one means very comfortably.

I'd go with the advice of buy and hold a global index, but the last 7 weeks has provided some wonderful trading opportunities, end result is the portfolio is back where it started largely (with 3 additional diversifiers that I planned to purchase before the Covid business) but the trading opportunities have provided extra profit, its pretty much over for the present moment...but who knows ?

[dealtn]

Hi, so I am wondering if semi-professional investors (because this is what we aspire to be) listen to Warren Buffet and factor his advise when making investments.

Never heard of him.

[1nvest]

Buffett's peformance since low interest rates has been average or below, since 2008 for instance comparing BRK-A with the S&P500 index https://tinyurl.com/y9fvxc7m

At other times he's had the benefit of 'free money'. Whilst others were at times paying perhaps double digit interest rates to borrow money, he had access to a large pool of free cost money i.e. the float of his insurance business - where premiums are paid in (people insure things), claims later paid out, and a large pool of money sitting there between. Recently that float is around $100Bn value. That competitive advantage/moat has at least in part enabled him to generate above average rewards, but seemingly much less so on a more level playing field - when others can also borrow large amounts at very low levels of interest rates.

He's also had the advantage of having invested across a period of time that has been exceptionally good for stocks, where interest rates have transitioned from exceptionally high levels down to exceptionally low levels (declining yields = higher prices).

BTW its Buffett (double f double t).

[1nvest]

I think he shared his advice to his wife for after he had gone - 90% low cost tracker, 10% cash buffer

I think he even suggested the S&P500 index tracker. Which for many was a clear signal that forward time he prefers that over Berkshire Hathaway stock.

[Aminatidi]

I'd look towards him for broad principles around the power of things like compounding and I think there are some good things to take away from listening to him and Charlie Munger at the AGMs but I also think there's a large slice of do as I say not as I do there.

Let's be fair he could lose 99% of his net worth and still be worth more than most people could ever dream of.

You or I don't have that luxury or safety net.

[jaizan]

The source of this question is the following. I hear a lot of people online quoting him and following his investment strategy. While he does say a lot of things which are factual and correct, the investments strategies which he gives are not correct IMHO. There is a lot of people I meet who seem to have followed him and have incurred a bunch of losses with the "stick to your guns" strategy when in fact you should "use your brain" is a better strategy.

1 There is no simple investing strategy that can be automatically followed, which will lead to outperformance AND protect you from 50% drawdowns.

2 If private investors attempt to imitate Warren Buffet or George Soros, Terry Smith, Joel Greenblatt, Seth Klarman etc, on average they're going to get worse results, as all the Guru investors are also using a very high degree of judgement in selecting stocks. The average investor isn't going to have the same degree of judgement.

3 Whatever strategy you follow, it's going to have periods of underperformance. Typically, even for a GOOD strategy, perhaps 3 years in 10, sometimes worse.

4 Whatever the strategy, individual stocks can lose money, due to our mistakes in stock selection. These are our own mistakes, not Mr Buffet's. The idea is to learn as we go and make fewer mistakes. If stock selection is too difficult, invest regularly in some Investment Trusts.


Of course I listen to Buffet, Munger etc.
Amongst the most important lessons I got are that:
(i) We need to be patient
(ii) We must expect that markets can go down by 50% or more at some point during our lifetimes, perhaps 70%. However, on average, the long term results for investing in stock markets have been vastly better than bank savings accounts. Stock market investors just need to be prepared to cope with volatility.
(iii) (Munger) Of course getting rich isn't easy. If it was, everyone would be rich.

[Dod101]

As 1nvest said a few posts ago, the name is Buffett.

Dod

[Itsallaguess]

Of course I listen to Buffet, Munger etc.

Amongst the most important lessons I got are that:

(i) We need to be patient

(ii) We must expect that markets can go down by 50% or more at some point during our lifetimes, perhaps 70%. However, on average, the long term results for investing in stock markets have been vastly better than bank savings accounts. Stock market investors just need to be prepared to cope with volatility.

(iii) (Munger) Of course getting rich isn't easy. If it was, everyone would be rich.

One of the key themes I always find when reading Buffett's Annual Letters for Berkshire Hathaway is to be reminded that behind most good companies are good people, and Buffett's respect for good, experienced, reliable, and responsible management shines through time after time...

Yes, any business might have potential to do well, but it's important to remember that one of the key areas that are needed to deliver on that potential are the people running the business and those employed by it...

Berkshire Hathaway Shareholder Letters -

https://www.berkshirehathaway.com/letters/letters.html

Cheers,

Itsallaguess

[stevensfo]

As 1nvest said a few posts ago, the name is Buffett.

Dod

I absolutely agree, but would like to point out that many schoolkids and adults grew up learning the clarinet, the most popular make being 'Buffet'.

Personally, having seen the great trouble so called 'mother tongue English speakers' have with they're/their/there and it's/its etc...I think that mispelling Buffett's name is the least of our worries.

Getting the English to speak and write English must surely be more important?

Steve

[dealtn]

As 1nvest said a few posts ago, the name is Buffett.

Dod

I absolutely agree, but would like to point out that many schoolkids and adults grew up learning the clarinet, the most popular make being 'Buffet'.

Personally, having seen the great trouble so called 'mother tongue English speakers' have with they're/their/there and it's/its etc...I think that mispelling Buffett's name is the least of our worries.

Getting the English to speak and write English must surely be more important?

Steve

Well I disagree. As someone whose name is often spelt incorrectly it is annoying, but also borderline rude.

For someone who is sufficiently well known, particularly in Investment circles, it isn't unreasonable to expect a correct spelling.

[Dod101]

dealtn seems easy enough?

Dod

[stevensfo]

As 1nvest said a few posts ago, the name is Buffett.

Dod

I absolutely agree, but would like to point out that many schoolkids and adults grew up learning the clarinet, the most popular make being 'Buffet'.

Personally, having seen the great trouble so called 'mother tongue English speakers' have with they're/their/there and it's/its etc...I think that mispelling Buffett's name is the least of our worries.

Getting the English to speak and write English must surely be more important?

Steve

Well I disagree. As someone whose name is often spelt incorrectly it is annoying, but also borderline rude.

For someone who is sufficiently well known, particularly in Investment circles, it isn't unreasonable to expect a correct spelling.

I'm sure there's some truth in what you say, and when the kids go back in September, perhaps the schools can have a nice cut-out of Buffet-the clarinet and Buffett- the Investor and spend the whole friggin term on an easy project to tell the difference. But meanwhile, we could maybe convince the teaching unions to start teaching the Teaching students correct grammar, so that they can go and teach the friggin kids some correct grammar?

Buffett said there is no reason for their investments to change as long as they're still solvent.
Buffet clarinets will reach their high G if they're played whenever there is a chance.

Steve

[dealtn]

I absolutely agree, but would like to point out that many schoolkids and adults grew up learning the clarinet, the most popular make being 'Buffet'.

Personally, having seen the great trouble so called 'mother tongue English speakers' have with they're/their/there and it's/its etc...I think that mispelling Buffett's name is the least of our worries.

Getting the English to speak and write English must surely be more important?

Steve

Well I disagree. As someone whose name is often spelt incorrectly it is annoying, but also borderline rude.

For someone who is sufficiently well known, particularly in Investment circles, it isn't unreasonable to expect a correct spelling.

I'm sure there's some truth in what you say, and when the kids go back in September, perhaps the schools can have a nice cut-out of Buffet-the clarinet and Buffett- the Investor and spend the whole friggin term on an easy project to tell the difference. But meanwhile, we could maybe convince the teaching unions to start teaching the Teaching students correct grammar, so that they can go and teach the friggin kids some correct grammar?

Buffett said there is no reason for their investments to change as long as they're still solvent.
Buffet clarinets will reach their high G if they're played whenever there is a chance.

Steve

Perhaps I wasn't clear, which of course is my fault.

I disagree with "...is the least of our worries".

I don't disagree with "...Getting the English to speak and write English must surely be more important"