Myth you too can become Warren Buffett

edited July 2014 in Awesome Books
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"Buffett is an entrepreneur, hedge fund manager, and highly sophisticated businessman."

"He was also placing some complex bets (short-term and long-term) in derivatives markets, options markets, and bond markets."

"two of Buffett’s most famous purchases weren’t traditional value picks at all but distressed plays."

"Warren Buffett is a great American and a great business leader, but do your homework before buying into the myth that you will one day sit atop the throne of “world’s richest person” by employing a strategy that is, in fact, nothing remotely close to what Berkshire and Mr. Buffett actually do."

I read this today. Any counter argument or support for the article?


  • Buffett is an expert at managing the trade-off between risk versus reward. He understands all forms of securities (which very very few people do). That's why he's so successful. I don't buy the argument that other people can't do it. I think most people can do it, only they don't dedicate the time and focus on the subject like he has. It's really that simple.

  • I'd like to make a sports comparison. Although Warren Buffett may be comparable to Lebron James or Michael Jordan in Basketball, I think he is more of a Dick Fosbury, who revolutionized the high jump, by jumping in a completely new way. Today, every high jumper uses the Fosbury flop. While I will never be as skillful as WB, he taught me the way to achieve extraordinary returns with lower risk.
  • I agree with Preston, what is required is time, effort and focus. Remember as a child, Buffett went to his local library and read all the books he could get his hands on regarding Investment and Markets. Even before that he collected the tops from soda bottles in his area to see which was the biggest seller. Then remember when he went to the head offices of GEICO and spent several hours asking questions about the company and the insurance business. As Munger has said, Buffett is a 'learning machine'. I believe the more you put in the more you get out, I also believe that you guarantee failure if you say 'I will never be as successful as...', 'I could never be able to do that' etc. One characteristic of successful people is that they have a firm self-belief and unwavering dedication and drive. As Buffett has said himself, he's no smarter than the next guy and you don't need a genius IQ to be a successful investor. You just need to stay in your circle of competence, keep things simple and try and make less mistakes than the next guy.


  • "I think most people can do it, only they don't dedicate the time and focus on the subject like he has"

    While he is humble about his intellect, it seems that his reading comprehension is on the tail end of a normal distribution curve of the general population. Put another way, he gets more bang for his buck than most - especially people like me who need to read, reread, and refresh on a continuous basis just to drive a point home. Most people can emulate the behavior with satisfactory results for sure, but just not to his capability.

    I personally believe that one has to really develop their own framework for investing that works for them. I am a trained engineer, so perhaps a more mechanistic framework as presented by folks like Dr Gray , O' Shaughnessy would be better. All I know is that it takes time, and patience...but the learning process and understanding the fundamentals of whats discussed on the podcast are helping tremendously.

    On a somewhat lighter note, I bought Securities analysis to the pool during the summer for casual reading. everyone was reading magazines, and thought I was a bit eccentric in this regard. So back to your point of can they do it...I say yes. Will they? unlikely. You really have to love the material like most of this community.
  • @djunh1

    Good points,

    I've noticed that some people favour learning through written word, some through numbers, and others through visual representation of ideas. I agree that one should develop a framework which fits with the way their mind works.
  • See last comment by Buffett..

    Recognize some of these investors....
    Here are quotes...

    American Association of Individual Investors: "It should come as no surprise that behavioral finance research makes a strong case for buying and holding low-cost, broadly diversified index funds."

    Mark Balasa, CPA, CFP: "That three-pronged approach is going to beat the vast majority of the individual stock and bond portfolio that most people have at brokerage firms. There is a certain elegance in the simplicity of it."

    Christine Benz, Morningstar Director of Personal Finance: "By buying total-market index funds--one for U.S. stocks, one for foreign stocks, and one for bonds--investors can gain exposure to a huge swath of securities in three highly economical packages."

    Bill Bernstein, author of The Four Pillars of Investing: "Does this (three fund) portfolio seem overly simplistic, even amateurish? Get over it. Over the next few decades, the overwhelming majority of all professional investors will not be able to beat it."

    Jack Bogle, Vanguard founder: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk. -- There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."

    Warren Buffett, famed investor: “I’d rather be certain of a good return than hopeful of a great one. -- Most investors are better off putting their money in low-cost index funds."

    Scott Burns, financial columnist: "The odd are really, really poor than any of us will do better than a low-cost broad index fund."

    Jonathan Burton, MarketWatch: "There are plenty of ways to complicate investing, and plenty of people who stand to make money from you as a result. So just think of a three-fund strategy as something you won't have to think about too much."

    Andrew Clarke, co-author of Wealth of Experience: "If your stock portfolio looks very different from the broad stock market, you're assuming additional risk that may, or may not, pay off."

    Jonathan Clements, author and Wall Street Journal columnist: "Using broad-based index funds to match the market is, I believe, brilliant in its simplicity.

    John Cochrane, President American Finance Association: "The market in aggregate always gets the allocation of capital right."

    Consumer Reports Money Book: "Simply buy the market as a whole."

    Laura Dugu, Ambassador and co-author of The Bogleheads' Guide to Retirement Planning: "With only these three funds in your investment portfolio you can benefit from low costs and broad diversification and still have a portfolio that is easy to manage."

    Charles Ellis, author of Winning the Loser's Game: "The stock market is clearly too efficient for most of us to do better."

    Eugene Fama, Nobel Laureate: "Whether you decide to tilt toward value depends on whether you are willing to bear the associated risk...The market portfolio is always efficient...For most people, the market portfolio is the most sensible decision."

    Paul Farrell, author of The Lazy Person's Guide to Investing: "Where does Fama invest his retirement money? 'In index funds. Mostly the Wilshire 5000.' "

    Rick Ferri, Forbes columnist and author of six investment books: "The older I get, the more I believe the 3-fund portfolio is an excellent choice for most people. It's simple, cheap, easy to maintain, and has no tracking error that would cause emotional abandonment to the strategy."

    Graham/Zweig, authors of The Intelligent Investor: "The single best choice for a lifelong holding is a total stock-market index fund."

    Alan Greenspan, former Chairman of the Federal Reserve: "Prices in the marketplace are by definition the right price."

    Mark Hebner, author of Index Funds: “A diversified portfolio which captures the right blend of market indexes reaps the benefit of carrying the systematic risk of the entire market while minimizing exposure to the unsystematic and concentrated risk associated with individual stocks and bonds, countries, industries, or sectors.”

    Hulbert Financial Digest: "Buying and holding a broad-market index fund remains the best course of action for most investors."

    Sheldon Jacobs, author of No-Load Fund Investing: "The best index fund for almost everyone is the Total Stock Market Index Fund.--The fund can only go wrong if the market goes down and never comes back again, which is not going to happen."

    Kiplinger's Retirement Report: "You'll beat most investors with just three funds that cover the vast majority of global stock and bond markets: Vanguard Total Stock Market; Vanguard Total International Stock Index and Vanguard Total Bond Market Index."

    Lawrence Kudlow, CNBC: "I like the concept of the Wilshire 5000, which essentially gives you a piece of the rock of all actively traded companies."

    Prof. Burton Malkiel, author of Random Walk Down Wall Street: "I recommend a total-maket index fund--one that follows the entire U.S. stock market. And I recommend the same approach for the U.S. bond market and international stocks."

    Harry Markowitz, Nobel Laureate: "A foolish attempt to beat the market and get rich quickly will make one's broker rich and oneself much less so."

    Bill Miller, famed fund manager: "With the market beating 91% of surviving managers since the beginning of 1982, it looks pretty efficient to me."

    E.F.Moody, author of No Nonsense Finance: "I am increasingly convinced that the best investment advice for both individual and institutional equity investors is to buy a low-cost broad-based index fund that holds all the stocks comprising the market portfolio."

    Motley Fools: "Invest your long-term moolah in index mutual funds that are designed to track the performance of a broad market index."

    John Norstad, academic: "For total-market investors, the three disciplines of history, arithmetic, and reason all say that they will succeed in the end."

    Suzy Orman: "One of my favorite index funds, Vanguard Total Stock Market (VTSAX), has a total expense ratio of 0.06%"

    Anna Pryor Wall Street Journal writer: "A simple portfolio of 3 funds. It may sound counter-intuitive, but for the average individual investor, less is actually more."

    Jane Bryant Quinn, syndicated columnist and author of Making the Most of Your Money: "The dependable great investment returns come from index funds which invest in the stock market as a whole."

    Pat Regnier, former Morningstar analyst: "We should just forget about choosing fund managers and settle for index funds to mimic the market."

    Ron Ross, author of The Unbeatable Market: "Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind."

    Paul Samuelson, Nobel Laureate: "The most efficient way to diversify a stock portfolio is with a low-fee index fund. Statistically, a broadly based stock index fund will outperform most actively managed equity portfolios."

    Gus Sauter, former Vanguard chief investment officer: "I think a very good way to gain exposure to the stock market is through the Total Stock Market Portfolio on the domestic side."

    Bill Schultheis, author of The Coffee House Investor: The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock

    William Sharpe, Nobel Laureate: "You may think your opinion is superior, but it pays to be humble, investing in the market rather than trying to beat it."

    Robert Shiller, Nobel Laureate: "A portfolio approximating the market may be the most important portfolio

    Warren Buffett, famed investor: "There seems to be some perverse human characteristic that likes to make easy things difficult."
  • I will fell stupid thinking I am the next Warren Buffett (and of course I don't care of being one) as much as I will fell stupid buying a stock index at 26+ p/e an CAPE 34+ (after a period of prolungated nirp zirp and now with interest rates going up...)...

    Which of the two is more naïve I don't is an hard battle...
  • If you get into a fight with a fool, no one will be able to tell who the fool is..
  • @Investor77 that's exactly Warren's tip to you: Buy 90% S&P 500 and 10% cash :smile:

    I don't agree with him. I don't own US at the moment, but invest internationally, in cheap, up-trending markets.
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