warren buffet just said this:

[Blue Collar Guy]

“But basically any attempts to pick the times to buy or sell, I think, are a mistake for 99% of the population. And I think that even attempts to pick individual securities is a mistake for people.” . I couldnt shine this guys shoes when it comes to investing. This is why i follow John Bogles advice buy the whole market , you will beat 80 % of the funds. This is what i do. I fell victim to a high priced financial adviser who put me in all sorts of investment schemes i lot money or under preformed all the time. i fired him and took control, i did much better.

 

[Boho]

That's from this. Here's a more extensive quote from it:

And eventually maybe, when you decide to start dis-saving when you’re 70 or 80 years of age or something of the sort, at that time you may sell ’em.

“But basically any attempts to pick the times to buy or sell, I think, are a mistake for 99% of the population...Buffett recommends passive investing through a “very, very low cost S&P 500 index fund.”

I just saw him in a YouTube video a couple of days ago emphasizing that most people should have very diversified investments. An S&P index fund isn't very diversified. I could find the video if anyone cares.

 

[Fedup]

He bought more IBM when it went down, so yeah, market timing.

 

[NW-Bound]

Buffett says 99% of people should not be active investors.

He himself belongs in the exclusive 1%, or more like the 1-in-a-million group. He is different than us. Look how much money he has, and how much each of us has.

This is his message: "Don't try this at home, kids".

 

[bradaz2488]

Yep, I wish I would have taken that advice back in 2005. Went with a financial adviser that was thru UBS because they held our company stock options. Did not cost me any fees until he moved to Wells Fargo in 2008. I was paying WFC 1.5% for him to handle ~1/3 of my total portfolio at the time. After I retired in 2013 I went back to see "what if" I would have just bought into a low cost balance fund with the funds I gave him and it turned out I would of $100K more money not including the $25K in fees that I paid WFC. Fired him right away. When I told him why he got very defensive and I even outlined the numbers in great detail for him showing him I would have $100K more. He basically had nothing to say to my analysis of his performace. I think most people think they need a FA because they think investing is complicated and when that start getting a large chuck of money they feel they need professional help. Yes, he had me in a lot of different investment vehicles and it looked very impressive, but at the end of the day a low cost balanced fun kick his ass.

 

[urn2bfree]

Warren Buffett is not really making money by investing, he makes it by controlling businesses well. He also uses debt to his advantage on a scale and in a way none of us really can. If you invest $100 dollars in something that goes up to $110- great. You got a 10% return. He invests $50, borrows $50 for the same investment at low interest rates (say 2% to make the math easy). He gets $59 dollars back for his $50 investment, a gain of 18% on the same investment.

 

[NW-Bound]

Buffett does not always take an active role in managing the companies that he acquired. I read that he trusted the management of the subsidiaries to do the right thing and left them alone. He also bought stakes in large companies that he did not control.

One thing for sure: Buffett is no indexer. He picks and chooses companies to invest in. And he pounces when the time is right.

 

[DrRoy]

I agree also. I have mostly done my own investment management. For 9 years, I had a "wealth adviser" who managed some of my money for a fee of 1%. The money that I managed performed better than the money that he managed so I fired him.

 

[OldShooter]

... I just saw him in a YouTube video a couple of days ago emphasizing that most people should have very diversified investments. An S&P index fund isn't very diversified. I could find the video if anyone cares.

Agreed. One of life's little mysteries for me is why he repeatedly recommends an S&P 500 index fund. It is only around 35-40% (cap weighted) of the world's investable stocks and pricing of S&P stocks is well known to be distorted by the buying and selling from the index funds that are tied to it. I think that total stock market index funds are much better, either total US, total world, or using a total world ex US to tilt a portfolio that is based on a total US fund.

 

[UnrealizedPotential]

Buffett says 99% of people should not be active investors.

He himself belongs in the exclusive 1%, or more like the 1-in-a-million group. He is different than us. Look how much money he has, and how much each of us has.

This is his message: "Don't try this at home, kids".

The problem is there is a lot of people that think, hey I am part of the 1%. They're not, and I hope they do not lose too much money before finding that out. I figured out a long time ago I was not part of the 1%. It sometimes can be a hard lesson to learn.

 

[pb4uski]

Agreed. One of life's little mysteries for me is why he repeatedly recommends an S&P 500 index fund. It is only around 35-40% (cap weighted) of the world's investable stocks and pricing of S&P stocks is well known to be distorted by the buying and selling from the index funds that are tied to it. I think that total stock market index funds are much better, either total US, total world, or using a total world ex US to tilt a portfolio that is based on a total US fund.

While I agree that a total stock fund is better.... the reality is that the S&P 500 is diversified enough for most people who prefer simple. Chart below for Total Stock vs S&P 500 index ... not a huge difference.... minimal differences for 1M, 3M, YTD, 1Y, 3Y, 5Y, Max

http://quotes.morningstar.com/chart...dDay":"05/02/2017","chartWidth":955,"SMA":[]}

 

[Blue Collar Guy]

Yep, I wish I would have taken that advice back in 2005. Went with a financial adviser that was thru UBS because they held our company stock options. Did not cost me any fees until he moved to Wells Fargo in 2008. I was paying WFC 1.5% for him to handle ~1/3 of my total portfolio at the time. After I retired in 2013 I went back to see "what if" I would have just bought into a low cost balance fund with the funds I gave him and it turned out I would of $100K more money not including the $25K in fees that I paid WFC. Fired him right away. When I told him why he got very defensive and I even outlined the numbers in great detail for him showing him I would have $100K more. He basically had nothing to say to my analysis of his performace. I think most people think they need a FA because they think investing is complicated and when that start getting a large chuck of money they feel they need professional help. Yes, he had me in a lot of different investment vehicles and it looked very impressive, but at the end of the day a low cost balanced fun kick his ass.

Dont feel bad, i did the same thing, i sent my guys kid thru college on what he cost me. we did what we thought was best, we learned,

 

[OldShooter]

... the reality is that the S&P 500 is diversified enough for most people who prefer simple. ...

Yahbut: I don't see it as a diversification issue. I see it as a mispricing issue that I don't completely understand the ramifications of. Stocks going onto the S&P are bid up first by the front runners, then by the funds who have to buy. Stocks going off the S&P are first bid down by the frontrunners and then by the funds. Granted the turnover in the index is not high, but each time this happens the investor in the fund loses a little extra. With a total market fund, this still happens but the buy/sell nibble is less as a percentage of the portfolio. Not hugely less because the S&P is 70% of the US market cap, but still less.

There are other factors, of course, but since I know of this flaw why would I willingly sign up for it?

Re diversification, the statisticians tell us that it takes 50-60 stocks to diversify away individual stock risk so certainly 500 is more than adequate. But these are all large caps, so an S&P 500 portfolio is underweighting small caps and probably to an extent underweighting value stocks. So if market diversification is an objective I would also argue against the S&P as a tool.

That's more detail on why Buffet's love of S&P 500 index funds is a mystery to me.

 

[pb4uski]

Got any other nits that you would like to pick while you're at it?

I think he mentions them because people know what the S&P 500 is and what an S&P 500 index fund is but total stock funds are less ubiquitous.

 

[OldShooter]

Got any other nits that you would like to pick while you're at it?

I'll cross a busy street to pick up ten basis points. Underweighting small caps and value would certainly cost me more than that. Ref Fama/French Three Factor Model. Goofed-up prices in the S&P could also cost that or more. I don't just don't know exactly how much.

Attention to detail in investing is one of the reasons DW and I have more money than we'll ever need. YMMV.

I think he mentions them because people know what the S&P 500 is and what an S&P 500 index fund is but total stock funds are less ubiquitous.

Probably correct.

 

[pb4uski]

I'll cross a busy street to pick up ten basis points. ...

Yeabut, from the previously posted graph of value of $10,000:

1M: S&P 500 beats Total Stock
3M: S&P 500 beats Total Stock
YTD: S&P 500 beats Total Stock
1Y: Total Stock beats S&P 500
3Y: S&P 500 beats Total Stock
5Y: S&P 500 beats Total Stock
10Y: Total Stock beats S&P 500
Max: Total Stock beats S&P 500

Looks like a draw to me.

.... Attention to detail in investing is one of the reasons DW and I have more money than we'll ever need. YMMV.

Perhaps. You may think that your attention to detail is a significant factor in your investing success, but that is hard to prove... we also have more money than we'll ever need but I don't sweat the small stuff.

 

[devans0]

I went back to school after retiring, to study investing and economics. Then I started investing, using newly acquired skills. Since then, my play-money investment doubled, I sold, then my next investment increased 40%. Having the bulk of my money in indexes, i'm able to find those perfect opportunity situations. If I don't see those, I don't invest.

A string of two in a row gives me a little confidence, but in rising markets, everybody is an expert picker...

I have some invested in a healthcare index, some in emerging market index, and some in BtC.

 

[OldShooter]

Yeabut, from the previously posted graph of value of $10,000:
...

10Y: Total Stock beats S&P 500
Max: Total Stock beats S&P 500

Looks like a draw to me.
...

Not to me.

 

[6miths]

10Y: Total Stock beats S&P 500
Max: Total Stock beats S&P 500

Yes have to agree that these are the important ones. They also likely mean that there is nowhere after 10 years that Total Stock doesn't win. Long term to me is 60 years.

 

[OldShooter]

Yes have to agree that these are the important ones. They also likely mean that there is nowhere after 10 years that Total Stock doesn't win. Long term to me is 60 years.

Yeah. The analytical argument and the statistical arguments all come to the same point: You have to be exposed to the whole market. Fama calls it "The market portfolio." Large caps, small caps, value, growth, ... They all have their day, and to deliberately exclude segments is really the top of a slippery slope that leads to stock picking and virtually guaranteed underperformance.

The more interesting question to me is the amount of home country bias that is appropriate. IIRC the US market, cap weighted, is about 54% of the investable world market. So I think the only argument for not holding 46% international is the exchange rate risk. Personally I think there is a lot more long-term downside to the dollar than there is upside, but that is a slippery slope that leads to trying to call tops and bottoms. So, I dunno. ...

 

[exnavynuke]

Buffett says 99% of people should not be active investors.

He himself belongs in the exclusive 1%, or more like the 1-in-a-million group. He is different than us. Look how much money he has, and how much each of us has.

This is his message: "Don't try this at home, kids".

Precisely. Everyone has their own skillsets, and should recognize the skillsets they don't possess. Buffett has a very rare skillset regarding evaluating investments. Just because he can do it, doesn't mean doing it is good advice for the "average" person. I have the skills to operate and maintain a conventional or nuclear power plant, and with adequate capital and desire I could even build one to provide my own power, I'd still advise the "average" person to just buy their power from a power company however.

 

[Boho]

I just saw him in a YouTube video a couple of days ago emphasizing that most people should have very diversified investments. An S&P index fund isn't very diversified. I could find the video if anyone cares.

I found a transcript of it. I don't think he has anything against world funds but he sends mixed messages here. He mentions both "world" and "America" here.

http://www.intelligentinvestorclub.com/downloads/Warren-Buffett-Florida-Speech.pdf

"If you are not a professional investor, if your goal is not to manage money to earn a significantly better return than the world, then I believe in extreme diversification. I believe 98%-99% who invest should extensively diversify and not trade, so that leads them to an index fund type of decision with very low costs. All they are going to do is own part of America. And they have made a decision that owning a part of America is worthwhile.

 

[Totoro]

Don't over analyze here .. he has said two things very often:

• Very low cost index, don't time it.
• Betting against America was stupid, and will remain so.

Since a S&P 500 fund has rock bottom costs, is heavy US and is very diversified, it is a great candidate for set & forget.


I'm quite sure going MSCI World gets the nod as well. The first item is more important than the second one.

 

[Fedup]

Warren Buffet is sitting on a lot of cash, so he's definitely timing the market. Take a look of what he said about IBM today.