The Sage of Omaha tells his wife to go cheap and passive!
Warren Buffet, arguably the greatest active investor of our times, recently issued his wife some heroically simple advice. In Berkshire Hathoway’s latest annual report, he writes about the investment instructions laid out in his will for the funds he intends to leave to his wife: specifically he advises to invest 90% into an S&P tracker fund, and 10% into short-term government bonds. He justifies these instructions by writing that the long term results from this policy would be superior to those attained by most investors using high-fee managers.
He goes on to attack active investing, warning that individuals and institutions were constantly being urged to buy and sell assets by those who profit most from giving the advice or affecting the transactions, and that the resulting frictional costs could be “huge” and “devoid of benefit”.
While we believe in a more evidence based approach to investing, diversifying into many more asset classes and looking to capture investment premia along the way, we strongly agree with the sentiment of Mr Buffet’s financial council to Mrs Buffet.
He concludes with: “So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.”
Senior Investment Adviser
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