Warren Buffett Letter 2017

What a week for people named Warren and Trump.  Did you catch the Oscars Best Picture mix-up with Warren Beatty??  The bottom line for me was: when you are unsure whether you understand something important, ask.

Exclusive Portraits Of Berkshire Hathaway Inc. Chief Executive Officer Warren Buffett

As for people named Warren Buffett this week yielded yet another annual letter of wisdom and perspective from the “Oracle of Omaha”.  Striking was that Mr. Buffett’s letter reflected several similar sentiments (some not) to those expressed by Mr. Trump in his Presidential address to Congress on Tuesday evening. Another week in America. Not always perfect but still good–even great.  

Mr. Buffett admitted to being far from perfect in his annual letter that he has written to shareholders since 1970. The 29-page missive contains terrific nuggets of investment — and life — wisdom. Here are my Top 3…there are far more that could be discussed.

Regarding the success of the American economy:

“Just look around you…75 million owner-occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent-filled universities… Above all, it’s our market system — an economic traffic cop ably directing capital, brains and labor — that has created America’s abundance.”

“Yes, the build-up of wealth will be interrupted for short periods from time to time. It will not, however, be stopped.”

“American business – and consequently a basket of stocks – is virtually certain to be worth far more in the years ahead.  Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that.”

This point cannot be emphasized enough for savers and investors of ALL ages. Especially for those under the age of 40, live by those words in sacrificing to ramp up saving.

Mr. Buffett slays hedge funds and their outrageous fees. He advocates strongly for passive mutual funds over active funds and stock-picking.  And by “passive funds” he does not mean “do-it-yourself”. He states that, for certain fees that deliver value to him he “will cheerfully write a big check”.

Mr. Buffett mentions the inevitability of market declines — even panics.  He states:

During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases.  Second, personal fear is your enemy. It will also be unwarranted.

Obviously, overcoming fear is easier said than done and easier said by one of the wealthiest human beings on the planet. However, one simple thing that Warren Buffett does well is consistency.  Consistency can seem boring but at the end of the day can reveal brilliance.

Sources: http://berkshirehathaway.com/letters/2016ltr.pdf; www.WSJ.com.

 

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