Why Warren Buffett’s Strategy is Failing You
The Truth About Warren Buffett: Why Warren Buffett's Strategy is Failing You
Alternative Approaches to Stock Market Success
Marcus Padley | July 12th 2024 | Education Corner
There are a number of ways to approach the glorious game of stock picking. Let me tell you what you already know, there is no Holy Grail and I get particularly irritated with the quotation, adulation and promotion of Warren Buffet. The idea that you can do it “The Warren Buffett Way”.
It is my contention that ‘The Warren Buffett Way’ and the way investors and advisers alike have skimmed the surface and pretended to apply his methods has cost the average investor more money than it has ever made them. I have no problem with Warren Buffett himself, but with the popular delusion that we can and should emulate him.
There is hardly a man in the street who does not quote Warren Buffettisms and hardly an adviser or investment product that does not claim an empathy with his investment style. But the truth is that there is only one Warren Buffett and only one person in the world that has his skill, patience, money, well-earned advantages and dedication to the task. But the rest of us?
To think we can assess a profit & loss account between dropping kids at school and holding down a job is simply delusional as is the marketing of the idea that someone who is not Warren Buffett can emulate him and his success on our behalf. Seriously, if it was possible to imitate Warren Buffett and transplant Warren Buffett’s judgement into another fund manager would we not know about it. Wouldn’t his fund be the highest returning fund in the market and wouldn’t we all be invested and be billionaires?
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But there is no such fund manager and no such fund, because being Warren Buffett and exercising his judgement is not easy, it’s not even very hard, it’s impossible, because so many elements of his analysis are so subjective. Getting stocks right is a very personal thing. I’m afraid if you really want Warren Buffett to be your adviser or your fund manager, then there is no alternative but to ring him. He is the only one with the cortex and the neural channels, developed over decades of focus that, when faced with a potential investment, says yes when its right and no when its wrong more often than anyone else. You can’t replicate that.
Additionally, if you were to attempt to invest on the Warren Buffett template you will need his patience, but the reality is that you can’t afford it. No-one seems to realise that Buffett has a very different risk profile to mortal investors. Buffett is one of those investors that has his school fees and mortgage paid off. He can
afford to be patient. If you don’t have more money than you need then I’m sorry but you cannot “Shut the stock market for ten years” because you can’t afford to. In other words you cannot adopt the value approach, buying stocks below intrinsic value and waiting for the rest of the market to catch on, because before they do you might have a few bills to pay. Let’s face it, you do not have the risk profile of Warren Buffett and because of that you cannot invest on the same timeframe, which is a
critical part of the value investment thesis. You have to be patient. Most of you can’t afford to be.
There are only three ways to make money out of Warren Buffett. Buy shares in Berkshire Hathaway, write a book about him or use his name to market a product with the subtle implication that he endorses it.
On that basis Warren himself is hardly to blame for all this hoopla and if there is any blame at all it is ours. For skimming the surface of the biggest investment success story in the world.
There is no Warren Buffett Way for other investors. There is only picking stocks that go up in price and to do that you would be well advised to rely on you, just you. With your understanding, your time horizons, your risk profile and your expectations. Not Warren’s. Forget Warren. You are not Warren. You are you, rely on that or as close as you’re going to come to Warren Buffett is living in the same crappy house and driving the same crappy car for the rest of your life.
More about the author – Marcus Padley
is a highly-recognised stockbroker and business media personality. He founded the
Marcus Today Stock Market Newsletter in 1998. Over the years, the business has built a community of like-minded investors who want to survive and thrive in the stock market. This is achieved through a combination of daily stock market education, ideas and activities.
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