Warren Buffett has again reminded investors – large and small – about the costs of following fashionable investors and styles and not being like him: consistent.
And in issuing this warning in his latest letter to shareholders, Buffett pointed to one of his favourite topics – the way some investors forget the costs when following what he calls “CEOs and market gurus with enticing ideas”.
And he claimed that “a patient and level-headed monkey” – could do as well as some managers by throwing darts at the S&P 500 companies and selecting 50 stocks.
Buffett made it clear he and Vice chair, Charlie Munger and others in the company like steady, reliable investors who number around half a million because their investment stance matches that of Berkshire – no frills, not a la carte, trend and fee chasers – steady, predictable, or as he wrote in the letter:
“At Berkshire, we have been serving hamburgers and Coke for 56 years. We cherish the clientele this fare has attracted.”
But he understands that not every investor wants that, some want a bit of excitement and others like other forms of investment.
“Productive assets such as farms, real estate and, yes, business ownership produce wealth – lots of it.
“Most owners of such properties will be rewarded. All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees.
“The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes.
“They will find CEOs and market gurus with enticing ideas. If they want price targets, managed earnings and “stories,” they will not lack suitors.
“Technicians” will confidently instruct them as to what some wiggles on a chart portend for a stock’s next move. The calls for action will never stop.”
“Many of those investors, I should add, will do quite well. After all, ownership of stocks is very much a “positive-sum” game.
“Indeed, a patient and level-headed monkey, who constructs a portfolio by throwing 50 darts at a board listing all of the S&P 500, will – over time – enjoy dividends and capital gains, just as long as it never gets tempted to make changes in its original “selections.”
“Still, investors must never forget that their expenses are Wall Street’s income. And, unlike my monkey, Wall Streeters do not work for peanuts,” Buffett added.