Warren Buffet is one of the most successful investors in history at the age of 88. His investment company Berkshire Hathaway Inc. has achieved a performance of 20.5% p.a. (in US dollars) since its founding in 1965 to 2018. In comparison, the S&P 500 recorded an annual increase of 9.7% in the same period.
Buffet is known for his statements in the annual shareholder letters. As trivial as the statements often appear, they are effective in alerting investors to the essentials of successful investing in a world of complex financial products, detailed financial analy-sis, economic forecasts, and daily corporate news.
For example, he points out that the cost of financial assets should be kept as low as possible in order to achieve good long-term results. In addition, the performance of active managers should be regularly critically scrutinized. In December 2007, Buffet made an interesting bet with Wall Street asset manager Protégé Partners. His bet was that no hedge fund beats the S&P 500 Index over a 10-year period. Protégé has selected five fund of funds, which should refute Buffet’s thesis. Buffet released the result in early 2018: the funds generated returns between +0.3% and +6.5% p.a., the S&P 500 achieved a performance of +8.5% p.a. in the same period.
Buffet’s closing statement was: «Performance comes, performance goes. Fees never falter.»
In the following we have collected for you some principles of Buffet, which should always be kept in mind:
«Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.»
«When promised quick profits, respond with a quick ‹no›.»
« … accumulate shares over a long period and never sell when the news is bad and stocks are well off their highs» … «the investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results.»
« … individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions.»
«Half of all coin-flippers will win their first toss; none of those winners has an expecation of profit if he continues to play the game.»
Independent investment controlling can ensure that the implementation of your investment strategy is in your interest cost-effective. Independent reporting ensures having the most important information. After all, it is crucial not to lose sight of the long-term goal on the horizon and to regularly check whether the chosen path still leads there.