Warren Buffett surprised everyone last weekend by announcing his retirement as CEO of Berkshire Hathaway at the company’s shareholders meeting. At 94 years old, it might have been expected, but his energy and enthusiasm for investing made it seem like he would go on forever. Buffett’s impact on investing is legendary because of his success and his willingness to share the principles behind it.
He could express his ideas in ways that made sense to the average investor. Buffett liked simplicity and staying away from complex financial instruments that were hard to understand. Berkshire Hathaway invests in insurance and financial companies, like GEICO.
But Buffett also showed interest in consumer goods. Brands like Dairy Queen, Coca-Cola, KFC and Taco Bell make up a big part of his portfolio. More recently, he invested a lot in energy, including Occidental Petroleum, and bought a railroad to support fracking.
Buffett’s investment strategy follows a few key principles. He invests in both growth and value stocks across different industries. He prefers companies that make products and services people use regularly and that are well-managed.
Buffett’s principles reshape investing norms
A Berkshire Hathaway investment is often seen as a vote of confidence in a company’s management. One of Buffett’s most famous pieces of advice is to “be fearful when others are greedy and be greedy when others are fearful.” This is a key part of contrarian investing.
It reminds us to make investment choices based on market sentiment, not just following the crowd, which can make investors buy high and sell low. Buffett didn’t predict the 2008-2009 financial crash, but he sold a lot of stock before it happened because he saw too much greed in the market. He later bought stocks at low prices when fear was high.
He also sold stocks near the end of last year when the market highs seemed unsustainable. For most individual investors, one of Buffett’s most important lessons was about fees. He said the fees we pay can be the biggest factor in our investment success.
To prove his point, in 2005, Buffett bet $500,000 that a low-cost index fund would do better than top hedge funds over ten years. Fund manager Tom Seides took the bet, but the index fund won. Buffett’s legacy in investing is one of clarity, common sense, and consistent principles.
As he retires, his investing wisdom will continue to influence and educate future investors.
