Episode 06: Who is Warren Buffett? What does Buffett invest in? How does Buffett invest? Buffett's Best Advice. You'll learn all this and more in this show!
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Transcript:
Hey what’s up everybody! I’m Mike Germinario and I teach investing.
In this show we’re going to learn about Warren Buffett. Who he is. What he does. How he does it. Then we’re going to talk about Buffett’s advice for individual investors, people like you and me.
So here we go. Warren Buffett, the Oracle of Omaha, is the owner and CEO of Berkshire Hathaway. With $874 billion in total assets Berkshire Hathaway is one of the top 10 largest publicly traded companies in the world. A household name, almost everybody has heard of Warren Buffett in some capacity as he is considered to be one of the greatest investors of all time. With a net worth of $102 billion he is in the top 10 of the world’s wealthiest people.
Buffett is also a generous philanthropist, as he pledged to donate 99% of his wealth to philanthropic causes. He also founded the Giving Pledge alongside Bill Gates, which is a charitable program for billionaires to pledge to give away at least half their fortune.
As an investor, Warren Buffett buys stakes in other businesses through Berkshire Hathaway. That makes Berkshire a conglomerate, which is a company that owns other companies. In Buffett’s 2020 letter to shareholders he wrote…
“Charlie and I want our conglomerate to own all or part of a diverse group of businesses with good economic characteristics and good managers. Whether Berkshire controls these businesses, however, is unimportant to us…our conglomerate will remain a collection of controlled and non-controlled businesses. Charlie and I will simply deploy your capital into whatever we believe makes the most sense, based on a company’s durable competitive strengths, the capabilities and character of its management, and price.”
By the way, Charlie is Charlie Munger, Buffett’s partner at Berkshire Hathaway in case you were wondering.
Warren Buffett’s investing philosophy is called “value investing,” a system he learned from his mentor Benjamin Graham. He finds value by analyzing these questions:
He’s not concerned about the day-to-day moves in the stock market, but rather he narrows his focus down to the company level.
This investment strategy is not easy. It requires a tremendous amount of research, skill and experience. That’s why Buffett recommends a different approach for individual investors, like you and me.
From the book “Money, Master the Game” by Tony Robbins Buffett says…
“It’s so simple. Indexing is the way to go. Invest in great American businesses without paying all the fees of a mutual fund manager and hang onto those companies, and you will win over the long term!”
So the Oracle of Omaha’s advice is to invest in the index as the easiest, most effective and cheapest option.
In fact, the instructions for his wife and their trust for after he passes are to put 10% in short term government bonds and 90% in a very low cost S&P 500 index fund. Buffett says…
“I believe the trusts 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.”
Buffett is obviously very confident in that advice. To showcase his belief in indexing further check this out. In 2008 Buffett made a bet with a hedge fund called Protégé Partners. The bet was a $1 million wager that over a 10 year period Protégé couldn’t beat the S&P 500 index fund.
Well…the ninth year into the bet, Buffett’s S&P 500 index fund was up $854,000 vs. Protégé’s active fund selections $220,000. Without even making it to year ten, Protégé conceded defeat saying…
“For all intents and purposes, the game is over. I lost.”
The money of course went to charity, the “Girls Incorporated of Omaha” since Buffett won.
Thanks for hanging out with me today. If you learned something please click the subscribe button. I also have a free guide for you – 5 simple rules of investing. Click the link in the show notes to get your copy.
I’m Mike Germinario, never leave money on the table of life and I’ll cya next time!
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