Wisdom From Warren

Photo by Alex Shute on Unsplash

Berkshire Hathaway, the holding company managed by Warren Buffett, recently held its annual shareholders meeting in Omaha, Nebraska.

This article at CNNMoney.com by Jason Zweig covers some of the key points delivered by Mr. Buffett and his business partner Charlie Munger.  Their annual shareholder meetings are always filled with gems about capitalism, investing and other issues ranging far and wide.

In Mr. Zweig's article, I'd like to call your attention to the following paragraph:

Asked what's in store for the economy, Buffett said he doesn't have a clue and doesn't care.

"I haven't the faintest idea," he said. "We never talk about it, it never comes up in our board meetings or other discussions. We're not in that business [of economic forecasting], we don't know how to be in that business. If we knew where the economy was going, we'd do nothing but play the S&P futures market."

His simple point: As an investor, you don't need to predict the economic cycle (or even pay much attention to it). Instead, you should focus on evaluating individual businesses if you pick your own stocks -- or, simply buy the entire market in the form of an index fund. When a shareholder asked for the single best specific investment idea Buffett could recommend to an individual in his 30s, Buffett said: "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."

Buffett’s comments pair nicely with this quote from Peter Lynch:

If you spend 13 minutes a year on economics, you've wasted 10 minutes.

It would appear, based on the above, that Mr. Buffett shares Mr. Lynch's opinion about trying to predict what's going to happen in the future.

It's a waste of time.

Further, Mr. Buffett goes on to say that the best investment he could recommend to an individual in his 30s would be a very low-cost index fund. 

I couldn't agree more, but I would also add that this would be a prudent investment approach whether someone is in their 30s, 40s, 50s, 60s, 70s, 80s, 90s . . . well, you get the idea.

While I don't agree with everything Warren Buffett says, I think it's wise to at least listen to what he says about investing.  He has a pretty impressive track record and depth of experience to draw from.

Have a happy and safe Memorial day weekend.