Invest Exactly Like Warren Buffett (Really)

Invest Exactly Like Warren Buffett (Really)

Believe it or not you can learn to invest exactly like this legendary investor in about 5 minutes.

Investing like Warren Buffett couldn’t be easier. There are a lot of scammers, gurus and talking heads trying to tell you it is a big mystery and you need to pay them to find out how to do it but in this article I can show you how to do it in 5 minutes – for free!

Video Analysis: Be Your Own Oracle

Like many legends, the rumors about Buffett’s style are exaggerated, twisted and sometimes just fabricated. For example, Buffett is often quoted as saying that “diversification is a protection against ignorance.” But did he really mean it?

He made a similar comment to this in 1998 to a group of MBA students at the University of Florida that is often quoted that reads as follows…

“…Once you are in the businesses of evaluating businesses and you decide that you are going to bring the effort and intensity and time involved to get that job done, then I think diversification is a terrible mistake to any degree.”

That sounds like he is pretty down on diversification and if that is true then how can individuals learn to pick the one or two “winners” that will make them rich without having to pay some “expert” to show them how? Lets take a longer look at the entire quote without the ellipses.

“If you are not a professional investor. If your goal is not to manage money to earn a significantly better return than the world, then I believe in extreme diversification. I believe 98% – 99% who invest should extensively diversify and not trade, so that leads them to an index fund type of decision with very low costs. All they are going to do is own part of America. And they have made a decision that owning a part of America is worthwhile. I don’t quarrel with that at all. That is the way they should approach it unless they want to bring an intensity to the game to make a decision and start evaluating businesses. Once you are in the businesses of evaluating businesses and you decide that you are going to bring the effort and intensity and time involved to get that job done, then I think diversification is a terrible mistake to any degree. I got asked that question the other day at SunTrust. If you really know businesses, you probably shouldn’t own more than six of them.”

Sounds a lot different now doesn’t it? In fact, Buffett’s own investment company Berkshire Hathaway is invested in an extremely diversified manner. They own a lot more than 6 stocks and have spread their risk across other asset classes as well including bonds, government debt, currencies, swaps, options and private equity.

Warren Buffett is not in the business of teaching others how to invest like he does. Off the cuff comments in an interview or Q&A session with a bunch of random MBA students is not likely to be entirely reliable or representative of what he really does as an investment manager.

The business that Buffett is in is investment management. His firm is publicly traded with two classes of stock. You will be able to buy a share of Berkshire Hathaway’s class B stock for less than $100 a share in 2010 after the stock is split. If you really want to invest like Warren Buffett why do anything besides buying stock in his fund?

If you always wanted the ability to share the returns of a billionaire this is your chance and you didn’t even have to buy a book, seminar, newsletter or video to do it. The moral of this story is that with a little research and some thought you can avoid most of the guru’s and their high priced advice and go right to the source.