Warren Buffett's advice for his wife

AlanP_2

Gadfium wrote: »

Like investing, many of us aspire to be like the greats. We read their books and dwell vicariously on their achievements. But most of us are sensible to realise that a Sunday afternoon scramble [STRIKE]in the Lake District[/STRIKE] will be our limits.

to the pub

atush

jjgold wrote: »

good post SAM
you're the only person so far in this thread to understand what he meant :T
everyone else needs to read SAMs post

No, perhaps you should go back and read.

Sam says (very well) what i and others said here EARLY on.

That WB doesnt want his wife to pay sharks (ie financial professionals) to sort out her investments. AS presumably she has no interest in managing her investments herself- unlike her husband.

_CC_

Sam_J12 wrote: »

I see this quote from WB a lot, and usually people use it as support for a passive investment strategy. The reality is that Buffet spent much of his life writing about how individual investors - amateur or professional - can beat the market with value investing. In fact, close to everything he wrote had that theme. In one of his shareholder letters he talks about a prominent academic who was amongst the first to champion passive investing (his name escapes me for the moment) in fact did not pursue a pssive investment strategy himself and held large numbers of Berkshire Hathaway shares, which made him very rich.

The reason Buffet gives for recommending that particular strategy is due to his loathing for most finance professionals, who he believes suck massive money from the system by inventing well paid roles for themselves and pretending these are essential to investing success. Passive investing is a simple way around this issue, which is why he recommends it for his wife after his death. It is not because he believes the market cannot be beaten, and he has written extensively on how it can be beaten and he is living evidence of it.

As for the strategy of 90/10 S&P500/bonds his reasoning is fairly simple - his wife(s?) can live on the bond income so does not need to sell shares at market lows, and Buffet has a huge amount of faith in the US economy to outperform the rest of the world and has shown itself to be hugely resilient over long lengths of time which is why he favours US stocks over any other. It is a bit of a bet, but one with a large amount of history supporting it.

Also, Buffets intends to give away virtually all of his wealth after his death, so I believe his wife will not be a billionaire.

I think people can learn a lot from listening to Buffet, but I think you could fall into the trap of thinking you're capable of things which only a select few have achieved if you take his words as gospel.

I have no doubt that value investing is a sound strategy for an active investor, but at the same time you have to acknowledge that his immense wealth didn't all come from what he was taught by Benjamin Graham. His stock selection abilities have far a large part been leveraged from his ownership of insurance companies where he makes use of the cheap float available for leverage, as well as the purchases of private businesses.

Most sensible people know the limits of their abilities and/or don't want to spend their time looking for cheap stocks to buy.

Buffett and others have specifically recommended cheap tracker funds as the best way for the majority of people to invest in the stock market.

jamesd

I'd also suggest cheap trackers, rather than expensive trackers, for most people, but that's just because most people aren't interested and won't pay attention to what happens with managed funds and their important changes of manager.

If you're not going to pay attention, passive is the way to go.