Sunday, October 26, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Buffett investment approach not what you may think

sievers column sig

By
From page B8 | June 22, 2014 |

Every year when Warren Buffett releases his annual report on Berkshire Hathaway, I always find it to be interesting reading. It is an excellent counterpoint to the usual superficial financial reporting in the media.

Too often the financial media focuses on the wrong topic, mainly because it sounds sensational and will sell. For example, when the media raises the subject of beating the market through astute stock picking, they often cite Warren Buffett. But what does this legendary investor actually say about the smart way to invest?

Buffett is considered to have such a track record of picking stock winners and avoiding losers that his annual letter to shareholders in his Berkshire Hathaway conglomerate is treated as a major event by the financial media. But the media emphasis is off target.

Usually the reporters are obsessed with current issues they can whip into a “crisis.” What does he think about the Federal Reserve taper? What could be the implications for emerging markets of a Russian military advance into Ukraine? What does an economic slowdown in China mean for developed markets?

Buffett has a neat way of parrying these questions from journalists and analysts. Instead of offering instant opinions about the crisis of the day, he recounts in his most recent annual letter a folksy story about a farm he has owned for nearly 30 years.

He states that he has not laid awake at night worrying about fluctuations in the farm’s market price. Instead, he has focused on its long-term value. He counsels investors to take the same sanguine, relaxed approach to liquid investments such as shares as they do to the value of their family home.

“Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations,” Buffett said. “For these investors, liquidity is transformed from the unqualified benefit it should be to a curse.”

While many people seek to ape Buffett in analyzing individual companies in minute detail in the hope of finding a bargain, he advocates that the right approach for most people is to let the market do all the work and worrying for them.

“The goal of the nonprofessional should not be to pick winners,” Buffett wrote in his annual letter. “The regular investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results.”

As to all the predictions out there about interest rates, emerging markets or geopolitics, there will always be a range of opinions, he says. But we are under no obligation to listen to the media commentators, however distracting they may be.

“Owners of stocks . . . too often let the capricious and irrational behavior of their fellow owners cause them to behave irrationally,” Buffett says. “Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits and, worse yet, important to consider acting upon their comments.”

The Buffett prescription isn’t rocket science, as one might expect from an unassuming, plainspoken octogenarian from Nebraska. He rightly points out that an advanced intellect and success in long-term investment don’t necessarily go together.

“You don’t need to be a rocket scientist,” he has said. “Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”

I think Buffett is spot-on in his opinions. But maybe that is because those are my opinions as well.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at mark@wealthmatters.com.

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Back from the ashes: One man is home for Halloween

By Amy Maginnis-Honey | From Page: A1 | Gallery

 
Free flu shots given at church

By Susan Hiland | From Page: A4 | Gallery

Gala boosts The Leaven’s efforts in Solano

By Glen Faison | From Page: A5

 
Military graduates have county ties

By Nick DeCicco | From Page: B10

Slim chance to stop coming higher RX co-pays

By Tom Philpott | From Page: B10

 
.

US / World

.

Opinion

Question of the week: Do think Fairfield has a crime problem?

By Daily Republic | From Page: A8 | Gallery

 
Sound off for Oct. 26, 2014

By Daily Republic | From Page: A8

Tourists get more than expected

By Letter to the Editor | From Page: A8

 
Leisure Town’s leaders support professional management

By Letter to the Editor | From Page: A8

 
.

Living

80-year-old nun still teaching

By The Associated Press | From Page: C3

 
Mormons address mystery surrounding undergarments

By The Associated Press | From Page: C3, 1 Comment

.

Entertainment

Jimmy Fallon’s picture book inspired by daughter

By The Associated Press | From Page: C6

 
PUBLISHERS WEEKLY

By The Associated Press | From Page: C6

Harris’ atypical life is now atypical book

By The Associated Press | From Page: C6

 
Lena Dunham bares more in new memoir

By The Associated Press | From Page: C6

.

Sports

Raiders try to erase only zero left in win column

By The Associated Press | From Page: B1

 
Sweet dreams: Sleep expert helps Giants in October

By The Associated Press | From Page: B1

Giants surge past Royals 11-4 to tie World Series at 2

By The Associated Press | From Page: B1

 
Stanford routs Oregon St. 38-14, faces Oregon next

By The Associated Press | From Page: B1 | Gallery

Stow shouts ‘Play ball!’ before Game 4 of Series

By The Associated Press | From Page: B2

 
Splash shots still define Giants’ ballpark

By The Associated Press | From Page: B2 | Gallery

Bumgarner to face Shields in Game 5 of Series

By The Associated Press | From Page: B2

 
Mo’ne Davis throws out 1st pitch at World Series

By The Associated Press | From Page: B2

Marlins’ Stanton expects to have normal offseason

By The Associated Press | From Page: B4

 
Raiders activate cornerback Hayden, DE Autry

By The Associated Press | From Page: B4

Kings’ Gay, McLemore cleared to play in opener

By The Associated Press | From Page: B4

 
Hodgson helps Sabres beat Sharks 2-1

By The Associated Press | From Page: B4 | Gallery

MacKenzie, Svoboda tied for PGA lead at Sea Island

By The Associated Press | From Page: B4

 
.

Business

Of mutual interest: What’s next for funds when Fed stops buying bonds?

By The Associated Press | From Page: B7 | Gallery

 
Apple Pay Q&A: What you need to know

By The Associated Press | From Page: B7

Crowdfunding gives a leg up to animal projects

By The Associated Press | From Page: B8

 
Google exec sets records with leap from near-space

By The Associated Press | From Page: B8

Review: Macs, mobile unite with Yosemite system

By The Associated Press | From Page: B12 | Gallery

 
Smart Spending: A spin with Wal-Mart’s savings app

By The Associated Press | From Page: B12

40 years later, ‘Power Broker’ is standard reading

By The Associated Press | From Page: B12

 
.

Obituaries

Eugene Sylvester Carter Sr.

By Susan Hiland | From Page: A4

 
Guillermo Lara Lopez

By Susan Hiland | From Page: A4

Melvin Tate

By Nancy Green | From Page: A4

 
Dr. Robert M. Takamoto

By Nancy Green | From Page: A4

.

Comics