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Investing Advice 2016 – Advice From Warren Buffett

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Investing Advice 2016 – Best Deal Right Now?

Can You Beat Warren Buffett? I can sum up some of the most common arguments I hear against index investing with a single name: Warren Buffett.
Buffett is chairman and CEO of American conglomerate Berkshire Hathaway, Inc. He’s also long been one of the richest people in the world. His personal net worth was last estimated at just over $84 USD billion.
Buffett also is perceived to be a stock-picker but in this video, I’m going to tell you why Warren Buffet is not a reason to pick stocks.

Referenced in this video:
The World’s Billionaires – https://en.wikipedia.org/wiki/The_World%27s_Billionaires
Berkshire Hathaway’s Annual Shareholder Letters – http://berkshirehathaway.com/letters/letters.html
Berkshire Hathaway 1996 Shareholder Letter – https://berkshirehathaway.com/letters/1996.html
Berkshire Hathaway 2013 Shareholder Letter – http://berkshirehathaway.com/letters/2013ltr.pdf
On Persistence in Mutual Fund Performance – https://www.jstor.org/stable/2329556?seq=1#page_scan_tab_contents
Luck versus Skill in the Cross-Section of Mutual Fund Returns – http://mba.tuck.dartmouth.edu/bespeneckbo/default/AFA611-Eckbo%20web%20site/AFA611-S8C-FamaFrench-LuckvSkill-JF10.pdf
Berkshire Hathaway 2016 Shareholder Letter – http://berkshirehathaway.com/letters/2013ltr.pdf
Berkshire Hathaway 2012 Shareholder Letter – https://www.berkshirehathaway.com/letters/2012ltr.pdf
Buffett’s Alpha – https://www.cfapubs.org/doi/pdf/10.2469/faj.v74.n4.3
A Common Sense Confession: I’ve Been Unfaithful to Market-Cap Weighting – https://www.pwlcapital.com/common-sense-confession-unfaithful-market-cap-weighting/

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42 Comments

  1. Ben Felix
    July 31, 2021 at 2:11 am

    Here's another look at BRK through a factor lens. Worth the read if you found this video interesting. https://blogs.cfainstitute.org/investor/2019/04/15/warren-buffett-the-greatest-factor-investor-of-all-time/

  2. Andrew Blazenko
    July 31, 2021 at 2:11 am

    Buffet wants his portfolio companies to pay dividends when their internal rate of return on investment is low and wants them to keep capital when they have growth prospects with high anticipated ROI.

  3. moon8canoe
    July 31, 2021 at 2:11 am

    Lovely. Nice work, as always.

  4. Janus Face
    July 31, 2021 at 2:11 am

    Of course, index funds are a convenient way of getting market returns.
    But they force you to own companies that I refuse to have a part in, such as tobacco.
    Furthermore, some of us do not have (reasonably priced or taxed) access to index funds.
    Unfortunately these issues are rarely mentioned in your otherwise truly excellent videos.
    So could you please do a video on how to invest if you are forced — for moral or practical reasons – to invest in individual stocks? (Personally I own a diversified portfolio of about 25 mostly blue chip stocks. My goal is not to beat the market, but to achieve reasonable long-term returns.)

  5. Q
    July 31, 2021 at 2:11 am

    Free leverage from insurance company float, and buying distressed shares in bulk are things that BRK can do that we cannot. Any investment style can look super with free leverage and economies of scale. Insurance float and bulk purchases aside, Warren Buffett is a wise man in the financial world, and definitely someone who seems to have exceptional advice.

  6. Francois Pages
    July 31, 2021 at 2:11 am

    I am French. My strategy : I duplicate a portfolio "Valeurs moyennes" composed of ten French stocks which appears in a French financial weekly newspaper ("Investir") (Displayed performance : + 611% since the beginning, end 2003) and duplicate, in another of their portfolios, "International" (10 stocks, too), the part of which that is of societies in the Euro zone. About seven arbitrations per year per portfolio of ten. Cost of all that : subcription to the newspaper "Investir", so 130€ per year. So, a (quasi) free actively managed stock fund strategy. I add to that an ETF on Asia ex-Japan.

  7. Team Skovhugger
    July 31, 2021 at 2:11 am

    🤔 how about the warren buffet 1 million bet ?
    And the fact that warren buffet have put over 90 % og hos wifes monny in a S&P 500 index …. i think this speak for it self…
    I will without a blink my eye put 50% of my monny in a low cost S&P 500 etf and the other 50% in birkshire &hathaway and never worry about it for the next 30 years …

  8. David Schmidt
    July 31, 2021 at 2:11 am

    Great video. One of Berkshire’s advantages is its unique ability to use cash from some business to offset the insurance risk in other businesses. In other words, it has a unique economy of scale. Also, he can take unique advantage because of his size to gain advantages in certain markets to create special opportunities such as when he cut a deal with Goldman Sachs during the financial crisis to get preferred stock with special dividends. The problem now is the size of Berkshire is now a disadvantage due to the law of large numbers and finding undervalued companies to buy. He even said that he would probably not beat the S&P 500 going forward.

  9. Donald Black money
    July 31, 2021 at 2:11 am

    have traded with a lot of individuals but I have never come across anyone as good as Metro__Kelvinfx on insta. just by applying his strategies, I now trade independently. he is the best I'd advise any novice in investing to trade with him .

  10. Primeval Atom
    July 31, 2021 at 2:11 am

    I think YouTube is something that he didn't have.
    So I will join the millions of others who are trying to pick their own stocks and beat the market.
    Which me luck lol

  11. Amine Benyakoub
    July 31, 2021 at 2:11 am

    So now I have to learn index picking

  12. Thomas Müller
    July 31, 2021 at 2:11 am

    4:31 The chosen investment company for the S&P 500 will be swimming in money.

  13. Matt English
    July 31, 2021 at 2:11 am

    FANTASTIC!!! TY!

  14. RSW20
    July 31, 2021 at 2:11 am

    Great video, great channel! Clear, straight to the point, in depth, with data. Thank you very much.

  15. Daniels Pengetips
    July 31, 2021 at 2:11 am

    Great video as usual, Ben!

  16. George Frazier
    July 31, 2021 at 2:11 am

    The low-volatility anomaly observes that low-volatility stocks have higher returns than high-volatility stocks in most markets studied. Low-volatility is an example of a stock market anomaly since it contradicts many financial theories' central prediction that taking higher risk must compensate with higher returns. Can you please explain the low-volatility factor premium?

  17. C Hipp
    July 31, 2021 at 2:11 am

    There is also another major difference that the video didn't mention. Berkshire owns controlling interests in most of it's holdings, meaning they can make decisions to impact the profitability of these companies. I may be alone here, but I'm not buying more than 50% of any companies on the NYSE, so a comparison to Buffet isn't apt.

  18. Billy Bones
    July 31, 2021 at 2:11 am

    Looking at TSLA, SHOP, W, Zoom, etc., you wonder how value is going to be a factor to beat averages.

  19. Dylan Bihler
    July 31, 2021 at 2:11 am

    If you owned just apple you would beat the market my alot, it's not crazy to beat the s&p500, people just over diversify and in turn own alot of losers

  20. I Cast Eldritch Blast
    July 31, 2021 at 2:11 am

    is there a US listed ETF of Ex-US small cap value stocks? I can't find one.

  21. Joe Blow
    July 31, 2021 at 2:11 am

    Great video. But lets get real. A significant part of Buffett's wealth, especially in the 21st century, was built upon crony capitalism. Buffett cozied up to and promoted presidential candidates like Hilary Clinton and Barack Obama. Then, after Obama was in office, he leveraged his connections with Obama to the hilt (and would have with Hillary as well). That's why his GE CEO Immelt was installed as the head of Obama's Economic Recovery Advisory Board in 2009 and then at the head of the Economic Advisory Board and then was appointed as chairman of Obama's outside panel of economic advisers. This all while GE and other Buffett interests were bailed out during the banking/housing crisis. Also carving out select government contracts and tax exemptions other less politically connected and influential businesses didn't get. Buffett also leveraged his relationship with Obama to help keep the Keystone pipeline from being completed so that his trains could continue to transport the sand oil from Canada to refineries in the US. All while pretending to be concerned about climate change like any good democrat is. I could go on and on and on about Buffett and Munger's rampant crony capitalism, something they never publicly acknowledge or are asked about when surrounded by the usual media sycophants. And whenever we see a Buffett hero worship video like this about how "successful" Buffet has been in investing, you never hear it mentioned. As if it's an illusion or not a real part of Buffett's success.

  22. Rebecca Evans
    July 31, 2021 at 2:11 am

    Your presentations are fabulous when it comes to succinct summaries with both insight and logical evidence.

  23. Eowid
    July 31, 2021 at 2:11 am

    One of your best videos IMO

  24. Cho Ao
    July 31, 2021 at 2:11 am

    What is your advice on investing in sector specific ETFs such as health care or media technology that come with low expense ratio?

  25. Stephan Wölcher
    July 31, 2021 at 2:11 am

    I am adjusting my strategy based on new learnings
    thank you for pointing me in the right way

  26. cmfrtblynmb
    July 31, 2021 at 2:11 am

    How about Renaissance Technologies? They are making incredible amounts of money year after year?

  27. Sean
    July 31, 2021 at 2:11 am

    BIG INTUITIVE QUESTION: Without the initial discovering of any one "factor" by a pioneer such as warren buffet, how do we know that it exists to be able to gain exposure to in the first place ?

  28. Susan Rodriguez
    July 31, 2021 at 2:11 am

    Why does this guy not have more subs?

  29. sparcx86 Channel
    July 31, 2021 at 2:11 am

    okay, after this video I0m closing my forex account and put everything on bitcoins, gold and of course SPY index fund.
    done.
    I'm done with this thing of trading, I can't win.

  30. Constantin Terteleac
    July 31, 2021 at 2:11 am

    Apologies in advance, I'm new in this game, but as we all know, how is said: buy when is low, correct?! how much you would have performed, %, if this year, you would have bought , when the market was down, in one of the top companies.

  31. D Bersan
    July 31, 2021 at 2:11 am

    9:36 "Buffett success is not due to his superior stock picking abilities, but to his implementation of a factor investing strategy"

    Meanwhile Buffett has no idea what the frick is a 'factor investing strategy', reads financial reports all day to pick the best performing stocks, and makes billions, decades on end.

  32. Jun Liang
    July 31, 2021 at 2:11 am

    Quoting from Jack Bogle "well, find two"

  33. Edgar Bandeira
    July 31, 2021 at 2:11 am

    Watching this video, the only thing I can tell is that I know nothing….

  34. Mason Mabin
    July 31, 2021 at 2:11 am

    What % should I allocate to momentum, quality, total market, high beta, et cetera?

  35. PB in SB
    July 31, 2021 at 2:11 am

    I 'm far from an expert and I barely know what I'm doing but I think if you pick a few companies you truly believe in and keep them for many years, then you can beat the index fund. I bought Apple, Amazon, Tesla 3-5 years ago.

  36. Jason Seymour
    July 31, 2021 at 2:11 am

    Buffett doesn't just pick stocks, he buys a controlling interest and then brings in his own management team to overhaul the company. Once the problems are corrected, he can sell all or some portion of that stock for a profit. So, Berkshire Hathaway is in essence a turnaround company.

  37. Jason
    July 31, 2021 at 2:11 am

    Statistically, you can always find a factor to explain any portfolio return. Only god know what risk is: quality factor, size factor, value factor, betting-against-beta, momentum, reversal, hundreds of factors.

  38. Glimppe
    July 31, 2021 at 2:11 am

    I don't really understand the argument that Buffett didn't do well because he chose good stock but rather that the stocks he chose demonstrated these factors that made them good picks. It seems to me the bottom line either way is, he chose good stocks. It also seems quite odd to say picking stocks well doesn't count, because (if) a given passive fund would also pick stocks well given the same principles of stock-picking.

    I mean, you are a proponent of factor investing while simultaneously claiming it's not possible to tell a good stock from bad ones. Obviously it's either or if there are some telltale factors to them.

  39. James
    July 31, 2021 at 2:11 am

    He gets all his video ideas from pragmatic capitalism no lie

  40. Paul Santori
    July 31, 2021 at 2:11 am

    Can you do some videos on which investments (ETFs, Index Funds) you recommend for Canadians to buy?

  41. Carlo 1995
    July 31, 2021 at 2:11 am

    Are actively managed funds superior against index funds in terms of returns for developing markets like the Philippines?

  42. Jeff Guarino
    July 31, 2021 at 2:11 am

    I don't know quite how but I have read that it is advantageous to collect dividends instead of capital gains inside a TFSA. Slight advantage, but still worth mentioning.