I have a deep love and respect for Warren Buffett, who I regard as many others also do, as the greatest investor of all time. (His retirement really hit hard) What always fascinated me was his confidence and amazing wisdom as he talked about how he invests and how others should, see for yourself two of my favorite mic-drop responses: In 1996 a shareholder asked him why at times the company only held 3 stocks. Buffett responded with an answer about how he invests that I don’t think any other investor can get away with: “we think diversification is, as practiced generally, makes very little sense for anyone that knows what they’re doing.” Then he added: "Diversification is protection against ignorance." In the 1993 shareholder letter he said this about the traditional retail investor, "By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. Paradoxically, when "dumb" money acknowledges its limitations, it ceases to be dumb." Concentration only makes sense if you’re a know-something investor who knows what they’re doing and if you don’t index funds are the smart choice. I am reading all his letters again these days and there are so many great lessons to cover like how sustainable ROE growth has strong long-term correlation with share price gains, how companies where little capital is required to run can outperform and how severe business change and exceptional returns don’t mix. I can write many posts unpacking just these 3 headlines (all from 1 letter 1987 BTW) and many more from other letters, with examples he gave, modern time commentary and comparisons from realities today. And I’m thinking about a new series: “Unpacking lessons of the Buffett Shareholder letters” Would you guys be interested in following along that kind of thing ?
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5 Comments
Nate
@hoodnate · 10d
The know-nothing investor line hit me hard. I tried picking winners at first, then realized an index fund was the smarter move for me. Count me in for the series.
Chris Pember@goldengriddle · 10d
Investing in the index fund is the most prominent advice I took from Warren.
Marsia @gnomishness · 11d
That would be wonderful!
CoderDonna @coderdonna · 11d
You know who else is a big fan of the Buffett letters? @ryne. He quotes them regularly! You guys should do a video or six on your favorites!
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