Warren Buffett’s advice for investors: "Experts should always be ignored"

• Buffett warns against expert recommendations in the current letter to shareholders
• Sitting still is the best strategy
• Inaction pays off for Buffett

Berkshire Hathaway investors look forward to two important events every year: the annual shareholder meeting in Warren Buffett’s hometown of Omaha and the investor legend’s letter to shareholders. While Berkshire investors and Buffett fans will have to wait until May 4 for this year’s meeting in Omaha, they can now read Buffett’s latest letter to his shareholders. In this he reviews the 2023 financial year of his investment holding company, but also has some advice on how Berkshire Hathaway investors should behave within the financial world.

The ideal Berkshire investor: Smart, long-term oriented and unimpressed by experts

In the current issue, Warren Buffett gives, among other things, an insight into his process of writing the letter to shareholders. It is useful to imagine the reader you are addressing. At Berkshire, these are “investors who trust Berkshire with their savings without hoping for a resale.” According to Buffett, Berkshire has attracted an unusually high number of these “lifelong” shareholders over the years. However, the ideal mental role model when he imagines these owners – who are exactly what Berkshire is looking for – is his sister Bertie. “Bertie is smart, wise and likes to question my thinking,” writes Buffett – and that’s exactly how he apparently wants the other Berkshire shareholders to be.

Bertie understands a lot of accounting terms and follows business news, but doesn’t see himself as an economic expert, the star investor continued. “She is sensible – very sensible – and knows instinctively that experts should always be ignored,” Buffett writes in his letter – implicitly advising all other investors not to listen to Wall Street experts or financial advisors. “It’s harder than you think to predict who the winners and losers will be. And those who tell you they know the answer are usually either delusional themselves or snake oil salesmen,” Buffett writes later.

However, with regard to Bertie, Warren Buffett gave another reason why he believes that experts’ investment advice should not be followed. “If you [gemeint ist Bertie; Anm. d. Red.] If she could reliably predict tomorrow’s winners, would she freely share her valuable insights and thereby increase purchasing competition? “It would be like finding gold and then giving your neighbors a map showing the location,” Buffett argues. However, Bertie knows who to trust and doesn’t let himself be fooled – especially not by so-called experts.

Buffett: Investors should “sit quietly and listen to no one”

As Buffett’s multi-page letter to Berkshire investors continues, it becomes clear again and again why, in his opinion, one should not follow the experts’ recommendations for short-term or frequent stock trading, but rather, like him, position oneself in the very long term. One should never forget that although Wall Street wants to make money for its customers, only “feverish activity” can really get the blood of the financial players there flowing. Therefore, according to Buffett, “any folly that can be marketed is vigorously marketed – not by everyone, but always by someone.” But according to Buffett, exactly the opposite, namely doing nothing, is the key to stock market success.

“I cannot remember a period since March 11, 1942 – the date of my first stock purchase – in which I did not invest the majority of my net worth in stocks, namely stocks based in the United States. And so far, so good,” says the now 93-year-old investor from his youth. The Dow Jones Industrial Average fell below 100 points “on that fateful day in 1942” and Buffett lost five US dollars by the end of school that day, but that soon changed again. Today the Dow Jones is at around 38,000 points, writes Buffett – but since the letter was written, the index has even risen to around 39,000 points. This shows that America has always been a great country for investors. “All they had to do was sit still and listen to no one,” says the Berkshire CEO, summarizing his key advice to investors.

Buffett is also keeping quiet with Berkshire Hathaway

Berkshire Hathaway is currently behaving in a similar way – despite record cash levels of $167.6 billion. According to Buffett, his investment holding company currently has “all in all […] “No way to deliver breathtaking performance” because there are no attractively priced takeover targets in sight that are also large enough to have a noticeable impact on Berkshire’s balance sheet. “There are only a handful of companies left in this country that are in the “We and others have endlessly selected them,” said Buffett. Outside the United States, there are “virtually no candidates who represent a sensible option for investing capital at Berkshire.”

So Warren Buffett is once again following his own advice and keeping quiet. This also applies to some of his existing investments, as the investor writes. “In 2023, we did not buy or sell shares in AMEX or Coke – extending our own Rip Van Winkle slumber that has now lasted well over two decades. Both companies have reaped the rewards of our inaction over the past year with an increase in their profits and dividends rewarded. […] Both AMEX and Coke will almost certainly increase their dividends in 2024 […] and we will certainly keep our stocks unchanged throughout the year. Could I build a better global business than these two enjoy? As Bertie will tell you, ‘Absolutely not.'” Buffett said.

Editorial team finanzen.net

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