Warren Buffett is an investing legend, of the “buy and hold” variety. His annual letter to Berkshire Hathaway shareholders is full of his folksy wit and wisdom. Here’s my favorite part of this year’s letter, which came out Saturday
The tens of millions of other investors and speculators in the United States and elsewhere have a wide variety of equity choices to fit their tastes. They will find CEOs and market gurus with enticing ideas. If they want price targets, managed earnings and “stories,” they will not lack suitors. “Technicians” will confidently instruct them as to what some wiggles on a chart portend for a stock’s next move. The calls for action will never stop.
Many of those investors, I should add, will do quite well. After all, ownership of stocks is very much a “positive-sum” game. Indeed, a patient and level-headed monkey, who constructs a portfolio by throwing 50 darts at a board listing all of the S&P 500, will – over time – enjoy dividends and capital gains, just as long as it never gets tempted to make changes in its original “selections.”
Productive assets such as farms, real estate and, yes, business ownership produce wealth – lots of it. Most owners of such properties will be rewarded. All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees. Still, investors must never forget that their expenses are Wall Street’s income. And, unlike my monkey, Wall Streeters do not work for peanuts.
It’s easy to focus on the monkey and the darts… but cagey ol’ Warren also baked in some key principles of his billionaire success: patience, level-headedness, inner calm, diversification and minimizing fees.
As Buffett notes, “the calls for action will never stop”… but many times the best move is no action at all. Your patience will be rewarded.
Now if you’ll excuse me, I need to find 50 darts and a monkey.