The chase by Frances Horodelski:
Warren Buffett has done something unusual this year with his annual shareholders letter – he’s released excerpts of it early through a piece in an upcoming edition of Fortune. It is currently making the rounds. Here are five lessons he learned from buying a piece of farm land and a rental property in NYC.
1. You don’t need to be an expert to achieve satisfactory investment returns;
2. Focus on the future productivity of the asset and if you can’t make a rough estimate of its future earnings, forget it;
3. If you focus on the prospective change in price of the asset, you are a speculator and he says he can’t speculate successfully and is skeptical of those who say they can;
4. Don’t worry about daily valuations focus on the future;
5. Forming macro opinions or listing to the macro (or market predictions of others) is a waste of time.
Mr. Buffett continues on in the letter to discuss other items including the “what” and “when” of investing with my particularly favourite quote is this from Barton Biggs: “A bull market is like sex. It feels best just before it ends.”
He also highlights that in his will (beyond his charitable donations of his Berkshire Hathaway shares) his instructions to the trustee is to keep 10% of the cash in short term government bonds and the 90% in a very low cost S&P 500 index fund. He also recommends a read of The Intelligent Investor, Ben Graham’s classic book on investing. He reminds us of Ben’s adage: Price is what you pay; value is what you get.
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