VOL. 127 | NO. 140 | Thursday, July 19, 2012
Rays of Wisdom
Dana and Ray Brandon
You Are Not Warren Buffet
By Ray and Dana Brandon
Ray’s Take There’s no doubt Warren Buffet is an investment genius. He’s truly one of a kind. Still, the Internet is loaded with websites insisting you can invest – and excel – just like Warren Buffet.
Don’t count on it.
In addition to a lifetime of experience and unique talents, Buffet has a lot of other advantages. First of all, he wields a vast amount of money. He can, and does, invest billions of dollars in a single company. When you do that you wind up with a better deal, preferred stock, and higher dividends – all big pluses the average investor does not enjoy. He is also patient. He knows the price he’s willing to pay for companies; then he waits for them to come to him.
He can buy whole companies, not just pieces of them. People seek him out with prime investment opportunities, often before talking to anyone else, and he has an entire company delivering in-depth and invaluable research.
Perhaps Buffet’s biggest advantage is that when he makes a move, everyone takes notice. After all, he is the “Oracle of Omaha.” Simply by making a newsworthy purchase, other investors are more likely to jump in, too. That’s good news for Buffet, but not necessarily for those who follow in his now-more-expensive footsteps.
However, Buffet has consistently promoted some investment strategies that can stand smaller investors in good stead, too: he invests in businesses he understands as well as those that represent good relative value, and he holds for the long term. He does not buy the new flashy ideas. He likes boring, off-the-radar companies with pricing power and good cash flow.
A lot of investors can make a lucrative strike, purchasing a stock that really takes off, but it’s important not to mistake luck for smarts. That’s one of the basic rules of financial planning. Warren Buffets don’t happen every day. You can learn something from everyone, but don’t overestimate your strengths – or underestimate your weaknesses.
Dana’s Take There’s one habit Warren Buffet has that everyone can adopt and profit by, and that is living frugally. Even though Buffet is one of the world’s richest men, he still lives in the same house he purchased some 50 years ago for $31,000. He has money to burn, but estimates his annual living expenses at well below $100,000.
Buffet realizes what so many of us forget: the surest way to increase wealth is to spend less than you earn month after month and year after year.
I recently met several retired seniors who travel often to exciting spots around the globe. One thing they had in common is that they live frugally and save for their passion: travel. They even watch their pennies while traveling.
Even if you can’t invest like Buffet, you can still emulate him, and profit well by doing so.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at firstname.lastname@example.org.