This is a re-post of Derek Foster’s most recent newsletter. It is about the simplicity of Berkshire Hathaway billionaire investor Warren Buffett’s investing strategies.
Derek is the author of several books on investing, including Stop Working, The Lazy Investor, and The Worried Boomer. (Reading Derek’s books is what got me started in investing, so I have no trouble at all in recommending them.) Sign up for Derek’s free newsletter, or buy one (or more) of his books, at his website: StopWorking.ca.
I studied Commerce in university with a focus on accounting, but I also took many finance courses. In those courses, we learned investment theory using complicated formulas with many Greek letters. It was incredibly difficult… and it has been absolutely no use to me in investing. The source of my investing success has been to read (a lot) and to learn from other investors (which has been easy to understand). The thousands of dollars and hours I spent on my degree would have helped me get a better career with a higher salary, but the hours I spent learning about investing has brought me to the point where I have a good income without needing a job! I have learned more from Warren Buffett than any other investor…which is why I have made the trek to Omaha the last couple of years. So did I learn a lot? Not this year…
The reason I didn’t learn much is because Buffett is incredibly consistent in his investment approach – buy simple “idiot-proof” companies that have some advantage at reasonable prices and then never sell. That’s why he bought shares in Coca-Cola decades ago and keeps the stock (as it keeps increasing its earnings and dividends). That’s why he bought Dairy Queen…I mean think about it…If you feel like a hamburger, you might choose McDonald’s or Wendy’s or Burger King or one of many other fast food options. But if you want soft serve ice cream, Dairy Queen reigns supreme (I mean who is the number 2 in that space)?
So this year I made the trek to Omaha (again) and sat in a huge stadium with 30,000-plus other investors to hear words of wisdom from the world’s best investor, Warren Buffett and his partner, Charlie Munger, who is also a billionaire investor in his own right. Through it all, I learned very little, as they have been saying the same things for years. When macro economic questions were directed at them such as what was going to happen to the Chinese economy, or the Euro, or US interest rates, they kept saying the same boring thing…”We don’t really know!”. The message was simple, buy good businesses and hold onto them regardless of what’s happening around the globe and you’ll do okay.
Variety might be the spice of life, but with investing, boring is good. I have said I am “The Idiot Millionaire” because I have no clue what the upcoming trade numbers will look like, what’s going to happen with inflation, or whether the Chinese economy will slow remarkably this year. But I do know that I own shares in companies like Colgate, which has increased its dividend for over half a century, and paid uninterrupted dividends since 1895! So as long as this trend continues, I don’t need to work for income, but can basically sit on my ass(ets) and collect ever increasing dividends (earning more money every year). That’s why I focus on the investments I’ve mentioned in my books and video series and even in my Youtube clips.
What do I know? Not complex equations with Greek letters! I’m an idiot, but I do know with fairly high certainty that you will probably keep brushing your teeth! And I’ll keep collecting higher dividends…
Derek Foster (The Idiot Millionaire)
I asked Derek if I could re-post this newsletter because it deals with the same topics- and comes to the same conclusion – as I do in my recent post, Personal Finance as Your New Hobby? No, namely that investing doesn’t have to be as complicated as some people make it out to be. If simple, non-complicated investing is good enough for Warren Buffett, it’s probably good enough for you and me, too.