BUFFETT’S INVESTMENT ADVICE
Warren Buffett Reveals Specific Investment Advice For Average Investors
FTMDaily.com – Each year, I look forward to reading Warren Buffett’s annual letter to shareholders. With a net worth of $58.2 billion, Buffett is considered the world’s greatest investor. He is a self-made investor and made his fortune buying great companies and holding them in his own company, Berkshire Hathaway. (As of this morning, one share of Berkshire Hathaway’s stock will set you back $186,400! If that’s too steep, you can choose to buy a B-share of the company for around $124/share.)
Regardless, in his latest annual letter to shareholders, Buffett shares highly specific investing advice for the average investor. According to Buffett, this is the same investing strategy that he has laid out in his will to be applied to his own wife’s inheritance. Here’s a quote directly from the letter to shareholders:
“What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.”
Put simply, Buffett is saying that the average investor could get better long-term investing results by simply placing 90% of their investable assets into an S&P index fund. Buffett specifically recommends the Vanguard 500 Index Fund (Ticker: VFINX.)
He suggests that the other 10% be placed into short-term government bonds.
It’s hard to argue with the world’s greatest investor. And it is true that over a long period of time, this strategy would have beaten most other investing strategies.
However, that being said, I believe that it is highly unlikely that the performance of U.S. stocks for the next 50 years will resemble that of the previous 50 years. The headwinds facing the U.S. economy are fierce. Shifting demographics, failing entitlements, and bankrupt institutions threaten to engulf America’s future prosperity.
So, I must take issue with Buffett’s optimistic advice, especially for younger Americans with a longer time horizon. This is a stock-picker’s market. As long as the Fed keeps pumping into the system, the party will continue. But when the next major market crash comes, it will rock investors to their core.
FTMDaily has long recommended to remain highly diversified. Some stocks, some precious metals, some real estate, and even investing in your own business.
These are difficult and trying times for all investors. Unfortunately, I just don’t think throwing all of your money into the U.S. stock market — and walking away — will work in this current environment. These are extreme times… And they call for extreme vigilance.
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Inside this Issue
For unexplained reasons, the Fed Chairman, Ben Bernanke continues to redact 84 meetings from his appointment calendar that occurred between January 1, 2007 and the pivotal collapse of Bear Stearns on the weekend of March 15-16, 2008.
McDonald’s Corp. (MCD), the world’s largest restaurant chain, said sales at stores open at least 13 months fell 0.3 percent in February as its U.S. business slumped for the fourth straight month amid harsh weather.
Bullion has already risen 11 percent this year even as the Federal Reserve, which next meets March 18-19, announced a $10 billion reduction to bond buying at each of its past two meetings, leaving purchases at $65 billion.
On the Comex in New York, copper dropped below $3 a pound for the first time since June.
New report shows buying beats renting until mortgage rates hit 10.6%
A new scam is costing innocent people hundreds, if not thousands of dollars. Here’s what you need to know to protect yourself.
U.S. Financial Markets
Real-time Gold and Silver Prices
Precious Metals Market Update with Tom Cloud
Expect the U.S. to turn a blind eye…
Russia showed no signs of yielding in the Crimea standoff as Ukraine’s prime minister prepared to meet U.S. President Barack Obama and western nations threatened further repercussions if Russia failed to defuse tensions.
The news comes three years after the devastating Japan tsunami and resulting nuclear accident.
Pope Francis has suggested that the Vatican could support gay civil unions in the future, according to one of the church’s most senior cardinals.
With only one name on the ballot, North Koreans have the choice of voting “YES” or “NO.”
Our understanding of the effects of fluoride is similar to our understanding of lead in the 1970s.
MyMagic+ is a $1 billion experiment in crowd control, data collection, and wearable technology that could change the way people play — and spend — at the “Most Magical Place on Earth.”
Snowden calls on liberty lovers to be the ‘firefighters.’
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