Nothing You Can Learn from Warren Buffett Will Help You Now

Unless you already have 100 million dollars. Do you have 100 million dollars?

I like to read finance headlines the way other people engage in travel: it’s my way of immersing myself in a foreign culture where I don’t speak the language and I don’t know what’s going on but everything there is oddly fascinating.

Except for any business headline that includes the name “Warren Buffett.” Every day, seemingly, a million new articles are written about Warren Buffett and what he’s investing in now and how he eats a cheap breakfast at McDonald’s and how you should do every little thing he does, because he’s a rich finance genius.

These are the most boring and pointless business news articles around. Because, unless you are already rich, there is very little you can learn from Warren Buffett that will help you in today’s investing world.

A quick biographical note on who Warren Buffett is:

Often referred to as the “Oracle of Omaha,” Buffett was born in 1930, the son of a U.S. Representative for the state of Nebraska, Howard Homan Buffett. He obtained a bachelor’s degree from the University of Nebraska and a master’s degree from the Columbia University School of Business, and in 1965 took over a textile company, Berkshire Hathaway.

Berkshire Hathaway had a long history as a textile company, but Buffett (and eventually his investment partner Charlie Munger) turned it into an investment and holdings company. Buffett’s grand strategy involved acquiring entire companies, or enough stock in companies to be a majority shareholder and exert influence on such businesses’ operations. He is famous for (among other things) being a proponent of “value investing,” a strategy by which investors search out stocks that they think are undervalued by the rest of the market.

So far, so good. I have no quibble with Warren Buffett’s investing strategy as such. It obviously has worked for him since he began to follow it in the 1960s, 70s, and beyond.

But anyone who thinks they’re going to apply his “genius” tips to their lower- or middle-class investment strategies is probably going to be disappointed.

Warren Buffett has made a lot of money through investing. His personal net worth is estimated to be more than 100 BILLION dollars.

But what has he done for Berkshire Hathaway lately?

In a recent article questioning how “value investing” should be viewed in the current financial industry, the author revealed that “Over the past decade, Berkshire Hathaway’s shares have grown at an annualized rate of 12%, marginally trailing the S&P 500’s annual total return of just over 12%.”

In other words, Warren Buffett’s “genius” investing strategy has not done any better than any investor owning a diversified portfolio or an ETF of all the companies listed in the S&P 500 would do.

If you’d like to see that proven in chart form, here’s a couple of interesting sites that do that for you. This chart shows you that the Berkshire Hathaway returns have been getting beat by a variety of other investment funds in recent years. This chart includes the helpful note that “returns generated by Berkshire Hathaway have decreased significantly in recent years compared to its stock returns in the 80s and 90s.”

Warren Buffett was very, very good at identifying companies that were undervalued, investing in them, and reaping the returns when their underlying value was eventually proved and their stock prices rose. Nobody is denying that, even if a case can be made that in today’s investing climate, his methods of value investing don’t quite work the same way they used to.

Here’s what the Buffett-related headlines at Yahoo! Finance have to say this week:

“Warren Buffett’s Biggest Bets in 2024”

“Buffett’s Bullseye: Meet the Four Stocks That Make Up Nearly 75% Of His Portfolio”

“Should You Buy Value Stocks or Growth Stocks? Warren Buffett’s Investing Advice May Come as a Surprise.”

If you click around on finance news like I do, you may click on these sometimes, just because you know the name Buffett and, even though you know he now largely makes money because money makes money, you’re still curious for any sort of business tip or information that will help your tiny little savings account grow just a little bit faster.

Spoiler alert: I clicked on all those articles. Here’s the takeaway — Buffett’s portfolio includes a lot of Apple, Bank of America, Coca-Cola, and American Express. Also, should you buy value or growth stocks? The short answer is “yes” (“Buffett views both value and growth as important qualities”).

Perhaps I should have instead titled this article: “Financial Journalism Is Lazy and Uses Warren Buffett’s Name As Pointless Clickbait.”

I don’t have any investing tips for you. I find business news fascinating, but I don’t know how to capitalize on it. If I had or knew how to make money I would be busy making it right now.

But I would like to challenge you to think outside the box if you’ve ever got a few extra dollars to invest. (Pro tip: Consider investing in whatever insider-trading wealthy politicians are investing in.) Don’t just throw your money at investments that Warren Buffett owns in his portfolio. If you do want to buy what he owns, learn how to read the basics of a company’s financials so you can have your own thoughts about its value.

The world has definitely moved on from the era when one theory of investing would work for you for your entire working and investing life. Leave Warren Buffett and his condescending thoughts about poor people back in the twentieth century where he belongs, and do your own reading and learning to find an investment strategy that works for you.