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Buffett Trashes Active Investing at BRK Shareholdings Mtg

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  • #1

    Buffett Trashes Active Investing at BRK Shareholdings Mtg

    At the Berkshire Hathaway 2016 Annual Shareholders Meeting on April 30, Warren Buffett updated the crowd on his bet some years ago that the Vanguard S&P 500 fund would outperform hedge funds over the subsequent 10 years. He then used a thought experiment with the crowd to demonstrate the importance of cost in the superiority of passive investing. Fascinating twelve minutes.

    You can watch the clip here: http://finance.yahoo.com/video/warren-buffett-slams-hedge-fund-204127686.html
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  • #2
    That was pure 12 minutes of gold. Thanks for sharing!

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    • #3
      So with one hand he is commending passive investing, while simultaneously being an active investor himself.

      Nice.

      Comment

      • #4

        YYjames wrote:



        So with one hand he is commending passive investing, while simultaneously being an active investor himself.

        Nice.
        Click to expand...


        This applies to everything buffett related. Do as I say not as I do. Also calls derivatives weapons of mass destruction but is one of the largest option writers in the country, if not the largest.

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        • #5
          Yes.

          That sort of two-face act is why most of the investment gurus irritate me.

          This blog included.

           

          and I promptly ignore them.

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          • #6
            Keep in mind, Buffet's advice is for the average person who does not have the time, education or intellectual capacity to properly vet companies and individual stock allocations.  Also, he invests such large amounts he can actually take control and shift decisions of companies and stock prices when he buys.  The average investor who has less than 1 million dollars to invest cannot shift a thing.  Warren Buffet is not nearly as good a physician or surgeon as I am.  And I will openly admit I am not nearly as educated on investing as he is.  He can literally move the tide of the ocean with his investments.  My investments are more like throwing a grain of sand in the ocean.....won't affect much.  I am trying to improve my ability to actively invest as I have seen multiple people make a crap ton of money this way.  However, the majority of my money remains in more passive and conservative investments.

            You can call it two faced, but that is not really his intention.

             

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            • #7
              Understand the intention. May be two face is a strong word.

              I like Buffet, I think he or Munger has mentioned what you are saying with a predicate that: "if you are the above mentioned average investor then do index funds BUT expect market (read garbage) returns (5% or less)"

              If people are fine with that then great! I can bet money Warren Buffet is NEVER fine with that. Hence a little caveat emptor would have made the video totally legit. It's 90% there already.

               

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              • #8

                Zaphod wrote:



                YYjames wrote:



                So with one hand he is commending passive investing, while simultaneously being an active investor himself.

                Nice.
                Click to expand…


                This applies to everything buffett related. Do as I say not as I do. Also calls derivatives weapons of mass destruction but is one of the largest option writers in the country, if not the largest.
                Click to expand...


                The biggest thing I got out of this speech was that he is against trying to pick a manager and very against paying that manager very high fees for their services.  He seems to take his own advice in that case.  He manages his own money, and pays a tiny fraction in fees.

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                • #9
                  "I can bet money Warren Buffet is NEVER fine with that."... that is actually not true. I read some time back that in his will, if he were to die before his wife, he has instructions that the majority of the funds going to his heirs wife be put in an S&P 500 or similar fund. So, he acknowledges that it is his financial genius and extraordinarily large funds at his disposal which makes his active stock picking (it probably shouldn't even be called as such in his case- he is almost buying companies, not stock picking) profitable or worth it.

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                  • #10
                    I'm no expert on Warren Buffett, but listening to his comments at that meeting (not just the clip I linked) made it clear that he wouldn't consider himself an "active investor." He repeatedly talked about buying (often controlling) interests in companies with an intent to hold them for decades, ignoring the stock price gyrations of those companies, not panicking over a bad quarter, etc. As others have noted, he might clarify that the best way for the average investor to replicate what he does is through a broadly-diversified, low-cost index mutual fund. Nonetheless, if you think he's actively trading, it might be worth listening when one of history's best "active investors" tells you he doesn't think you can emulate what he has done. Nothing stops you from attempting to prove him wrong.

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                    • #11
                      I would say Buffet is no more a hypocrite in his message than any Boglehead who chooses to have their career be in business.  Just because his assets are so large that his business involves moves that shape the entire market doesn't mean that he thinks differently than we do about investing. He just knows that his "labor" (by which I mean something he does which generates value) is the valuation of businesses for the purposes of making profit. In his eyes, that labor is completely different from investing.

                      It would be like telling WCI that investing so much of his time and resources to his business makes him a hypocrite because he should have just taken that capital and invested it in the markets.  He didn't want to just invest money (he does that separately) - he wanted to labor and generate value from it.

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                      • #12
                        So you're saying the valuation of business and providing capital to that business to increase business or Growth I.e what buffet does is NOT investing and passively (read what a monkey can do) into an index fund is investing ?

                        Alright.

                        For the record not calling him hypocrite - read what I said; it's a good way to "invest" but you get average returns not "buffet" returns. If you're ok with that then great.

                        Think I am wasting time on these boards.

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                        • #13

                          YYjames wrote:



                          Think I am wasting time on these boards.
                          Click to expand...


                          :roll:

                          Comment

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