This week let’s look at two of Buffett's thoughts on the fundamentals of investing.
The first is “You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no””. Guess what, he’s talking to 99% of the population (including most financial advisors). Countless studies have shown that there is no evidence that the vast majority of people, mutual funds, and advisors beat the market. In fact, most underperform the market by a fair margin. Follow Warren Buffett’s advice, develop a solid financial plan and execute it as simply and cheaply as possible. You’ll outperform the vast majority of investors and advisors who “swing for the fences”.
The second point, “Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth”)”. Translation: Ignore the predictions/“analysis” from CNBC, the Wall Street Journal, Forbes, Money Magazine, the NY Times, etc. Successful investors ignore the daily bilge spewed out by the media. They, like Mr. Buffett, view their investments as long-term holdings. They could care less about the constant noise that is meant to draw you in so that they can SELL advertising-not to provide you with useful information. Don’t be an investing “chump” and fall into the media’s trap.