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The Warren Buffett Secret
This article was originally published in our weekly newsletter.
Warren Buffett is probably one of the most quoted individuals in the financial world, and for good reason.
Take a look at what Berkshire Hathaway (Green) did during the “lost decade” (2000 to 2010) when the S&P 500 (Black) was relatively flat for 10 years.
While many Americans were focused on the newest companies and other opportunities, he remained focused on the basics.
He built his portfolio around companies such as Wells Fargo, Coca-Cola, and American Express, among others.
Sure, the 2008 financial crisis was rough for him.
However, the 2008 financial crisis was rough for nearly everyone in the stock market.
See below:
No one can control the stock market.
Even during the difficult times, he remained resolute because he believed he had high-quality companies in his portfolio that would recover… and they did.
Here’s what his portfolio has done from 2010 to today.
Few investors can claim to have beaten the S&P 500 during a flat market cycle and kept pace with it during a growth cycle, as shown in the chart above.
He did it without frequently trading.
He did it without a broadly diversified portfolio.
He did it without the “hot stocks.”
The Takeaway
Sometimes, we believe more is better.
More stocks.
More diversification.
More [fill in the blank].
Sometimes, we assume that complicated is good.
Stocks with sophisticated (a.k.a. complicated) business structures.
Investment vehicles that are built around option contracts and other more sophisticated instruments.
The truth is, when it comes to your portfolio, simple and boring may be the better approach.
The hard part, in my opinion, is found in the plan and how it is maintained (tax planning, Social Security optimization, legacy planning, and so on).
Is the goal to show off how diversified and complicated your plan and portfolio are?
Or is it to enjoy a good life?
That’s up for you to decide.
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This content on this website is provided for informational purposes only and is not intended to serve as the basis for financial decisions. It should not be construed as investment advice or a recommendation.
Investment advisory services are offered through Kedrec, LLC, a Kansas state Registered Investment Advisor. Insurance products and services are offered through its affiliate, Kedrec Legacy, LLC. We are not affiliated with the US government or any governmental agency.
Investing involves risk, including possible loss of principal. No investment strategy can guarantee success, ensure a profit or guarantee against losses. Insurance product guarantees are backed solely by the financial strength and claims-paying ability of the issuing company.
Insurance and annuity products involve fees and charges, including potential surrender penalties. Annuity withdrawals are subject to ordinary income taxes and potentially a 10% federal penalty before age 59-1/2. Life insurance generally requires medical and potentially financial underwriting to qualify for coverage. Optional features and riders may entail additional annual cost. Product and feature availability may vary by state.
Tax, legal and estate planning services are available only to members who purchase the Fresh Wealth Plan Membership level. Tax, legal and estate services provided by our network of tax and legal professionals. Always consult with qualified tax/legal advisors regarding your unique circumstances.
This content on this website is provided for informational purposes only and is not intended to serve as the basis for financial decisions. It should not be construed as investment advice or a recommendation.
Investment advisory services are offered through Kedrec, LLC, a Kansas state Registered Investment Advisor. Insurance products and services are offered through its affiliate, Kedrec Legacy, LLC. We are not affiliated with the US government or any governmental agency.
Investing involves risk, including possible loss of principal. No investment strategy can guarantee success, ensure a profit or guarantee against losses. Insurance product guarantees are backed solely by the financial strength and claims-paying ability of the issuing company.
Insurance and annuity products involve fees and charges, including potential surrender penalties. Annuity withdrawals are subject to ordinary income taxes and potentially a 10% federal penalty before age 59-1/2. Life insurance generally requires medical and potentially financial underwriting to qualify for coverage. Optional features and riders may entail additional annual cost. Product and feature availability may vary by state.
Tax, legal and estate planning services are available only to members who purchase the Fresh Wealth Plan Membership level. Tax, legal and estate services provided by our network of tax and legal professionals. Always consult with qualified tax/legal advisors regarding your unique circumstances.