The Market is a ‘drunken psycho’: Warren Buffet Reveals his investing secrets

The world’s third richest man has revealed how he made his billions — and it’s not as complicated as you’d think.

Berkshire Hathaway CEO Warren Buffett, 84, is arguably the world’s most closely watched investor, with a net worth of more than $A90 billion.

In a recent interview, Buffett had a few pearls of wisdom for all investors.

Asked for the secret to his investing success, the “Oracle of Omaha” took a leaf from Nike.

“The most important thing to do is just do it. Pay no attention to the headlines in the paper or people on television. Just put aside a little money every month — put it in a very low-cost index fund. If you do that throughout your working career you’re bound to have substantial capital in the end. Don’t try to time it, don’t try to pick individual stocks, just put X dollars per month away and you’ll live a very comfortable life.”

Essentially, Mr Buffett’s advice encapsulates our investment philosophy. What I admire about his advice, is it has not changed. In our ‘Live Well – Retire Well’ seminars back in 2001, we quoted Mr Buffett’s comments from his 1996 Birkshire Hathaway Annual Report which read;

“Most investors, both individual and institutional, will find the best way to own common stocks is through an index fund charging minimal fees.” – 1996 Berkshire Hathaway annual report.

He went on to liken the stock market to a “drunken psycho”. “You can ignore [the stock market]. You’ve got your choice of thousands of businesses, and the best thing for most people is to buy a cross-section of them,” he said.

“But every day I get offered through the stock market thousands of businesses and the prices change every day, and the nice thing about it is that this imaginary person out there, Mr Market, is kind of a drunken psycho.

“Some days he gets very enthused and some days he gets very depressed. And when he gets really enthused, if you happen to be trading stocks, you sell to him. And if he gets very depressed, you buy from him.

“There’s no moral taint attached to that. When people get scared other people get scared, and when they get exhilarated, [other people] get exhilarated.
“Emotions are contagious, and emotions have no business in investing.”

Stephen Lowry CFP, DFP, FAIM, is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.

Performance data shown represents past performance or simulated performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.

 

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