What comes to mind when you hear the name Warren Buffett - investor, mutual fund manager, CEO, entrepreneur, stock picker, philanthropist, or billionaire?
Whatever you think, one thing is clear: he has made a lot of money investing over the years.
If you're wondering, Forbes' 2015 ranking places his net worth at $72.7 billion, which makes him the third wealthiest person in the world behind Mexican telecom king Carlos Slim ($77.1 billion), and Bill Gates ($79.2 billion).
Market Performance |
Index |
MTD % |
YTD % |
3-year* % |
Dow Jones Industrial Average |
-1.97 |
-0.26 |
10.40 |
NASDAQ Composite |
-1.26 |
3.48 |
16.60 |
S&P 500 Index |
-1.74 |
0.44 |
13.66 |
Russell 2000 Index |
1.57 |
3.99 |
14.70 |
MSCI World ex-USA** |
-2.09 |
3.17 |
5.29 |
MSCI Emerging Markets** |
-1.59 |
1.91 |
-2.19 |
Source: Wall Street Journal, MSCI.com
*Annualized
**USD
Buffett's success over the last 50 years just enhances his credibility, and when I think of Warren Buffett, "patience" and "value investor" are among my first thoughts.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price," Buffett once remarked.
"If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes," he also advised. That compliments another one of his quips, "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
He seems to have mastered the art of patience, not worrying about the daily twists and turns in the market in favor of the long term view.
Or course, there will be times when we make specific buy or sell recommendations regarding various investments, some of which may have to do with economic fundamentals or your personal situation.
Still, Buffet's "forever" philosophy is a guideline that reminds us to be patient investors, keeping our eyes on the long-term goal of financial freedom.
In some ways, his accumulated comments add up to the equivalent of a Book of Proverbs for investing. There generally aren't hard and fast rules that apply to every situation, but a focus on the fundamentals has typically proven to be among the wiser paths one can take.
Just review Buffett's long-term performance. Since today's management took charge at Berkshire in 1964, he's averaged a 21.6% compounded annual gain, or an astounding 1,826,163% in 50 years, according to the most recent letter he released to shareholders.
That compares to a 9.9% annual rise in the S&P 500 Index, inclusive of dividends, or 11,196% during the same period.
Of course, we aren't advocating pursuit of Buffett-like returns (for one thing, he gets investment terms not available to the general public!), nor would we want to suggest that our goal is to consistently exceed or even match an index like the S&P 500. There are too many factors that go into our recommendations, including a cash and fixed income component that has historically reduced performance over the longer term, but has better managed risk while provide a critical income component.
But one final thing. Even with severe bear markets in the mid-1970s, 2000-02, and 2008-09, stocks have still registered strong returns over the longer term.
I can't say for sure where the market will be in 12 months-who really can? But an investment in a broad-based portfolio is basically grabbing a stake in the global economy.
While we'll see setbacks from time to time and from region to region, economies continues to plow forward, supporting corporate earnings and rewarding investors who practice patience. ##