Warren Buffett, the founder, and CEO of Berkshire Hathaway, also known as the Oracle of Omaha, recently gifted us his annual letter. Before its release, investment gurus across the world awaited its pages. This letter conceptualizes important investment themes that earn a lifetime’s worth of money, tales about how America will always prevail, and details about why Berkshire Hathaway will never sell any subsidiaries. The core themes’ have both simplicity and profoundness, and distilling his wisdom will benefit anyone who does so. After all, combining simplicity and profoundness with investing is why Buffett is so successful.
Buffett elaborated on how many “miss the forest for the trees” when looking at Berkshire Hathaway. Although Buffett talks about Berkshire and its operations, the notion goes beyond that. The concept of seeing the bigger picture can be applied to almost anything you do. Specifically, with investing, you can be missing the forest for the trees for simple reasons, such as waiting for the right time or skipping saving money altogether. When the forest is economic prosperity, the many “trees”, or ways to achieve your money goals, can be distracting. The simple approach of making sure you save and invest will likely provide better results than waiting for the perfect investment or doubting the stock market.
While the investment environment can vary, through tragedy and triumph we know one thing: historically, stocks have gone up. Buffett pointed out that 77 years ago, he invested $114.75 in his first stock. If he had left that same amount of money in the S&P 500 index for 77 years, he would have $606,811 today. This is through years with wars, inflation in the double digits, and unbelievable natural disasters. The fact that a US-based investor could multiply their investment by 5,288 shows how strong our country is. Buffett goes on to say that a gloom-and-doom gold investor with no faith in the United States who invested then would have only 1% of the S&P 500 investor’s resulting investment. This concept highlights the faith one should have in our country’s systems because of our astronomical economic growth.
Looking at the world through a lense of great understanding and simplifying the unnecessary is the reason Buffett amassed his fortune. That fortune continues to grow by carefully protecting ownership in investments or purchases of good companies. Buffett says in his letter, “Truly good businesses are exceptionally hard to find. Selling any you are lucky enough to own makes no sense at all.” A good investment that one understands, that continues to bring rewards, and is sustainable in the long-term is rare to find, which is why Buffett holds onto them. If you find investments of this type, you too can compound your money into a lifetime’s worth.
At Fogel Capital Management we implement many of Buffett’s investment philosophies for our clients. If you would like to discuss this article further or request a free portfolio consultation, please call us at 772-408-9215.