WSJ extracts four tips for long-term investing from Warren Buffett’s 2014 annual letter to Berkshire Hathaway’s shareholders. Here are excerpts.
- Own low-cost S&P 500 index funds: “Don’t try to pick winning stocks. Instead “own a cross section of businesses that in aggregate are bound to do well.” A low-cost S&P 500 index fund helps any investor do this well.”
- Ignore your or anyone else’s predictions about long or short-term price changes. “Focus instead on productivity of assets.”
- Ignore the macro environment and political environment: “Buffett notes that when he and his partner Charlie Munger buy stocks, they think of them as “small portion of businesses” and try to see the earnings power of these businesses over the next five years or more. “In the 54 years we have worked together, we have never forgone an attractive purchase because of the macro or political environment.””
- Make as few investments as possible: “Investors these days are pushed to be active and to buy low, sell high. Frequent buying and selling only cuts into long-term returns. Mr. Buffett continues: “Ignore the chatter, keep your costs minimal, and invest in stocks as you would a farm.””