'How he invests is completely different' - NZ fund manager takes lessons from a legend
Warren Buffett is set to retire from his role leading Berkshire Hathaway.
Photo:
AFP
There were lots of lessons for local investors at Warren Buffett's annual shareholder meeting in Omaha, a NZ fund manager says - but whether the average person can follow through on them is another thing entirely.
The legendary investor announced at the weekend that he would retire from his role leading Berkshire Hathaway.
Buffett transformed Berkshire Hathaway from a medium-sized textile company when he bought it in the 1960s into a giant conglomerate, now valued at more than US$1 trillion (NZ$1.68 trillion) and with liquid assets of US$300 billion (NZ$505 billion).
Koura founder Rupert Carlyon was at the meeting and said Buffett explained how to be a good investor in the clearest way he had ever heard.
He said Buffett made it clear that it was important to be patient and wait for opportunities.
"Don't invest because you've got the money but because you've got the right idea."
Carlyon said retail investment platforms might give people the idea that investing was easy and that they only needed to find companies that had had a share price fall to spot an opportunity.
"How he invests is completely different.
"When I listen to him, his story about investing is about patience and a hell of a lot of work… he's also clear that if you're not willing to be patient, if you're going to be emotional, you should find yourself a fund.
"If you're emotional about money, get out of the room. If you can't check your emotions, you can't be an investor. If you can't read a balance sheet and understand a balance sheet, you're always going to lose. I can see why he's been so successful. The big question is whether other people can replicate what he does and often the answer is no.
"Even if you look at the financial world no one can be anywhere near as patient as he is."
Carlyon said Buffett would sit on cash for a long time while he waited for the right opportunity. While he would rather not have as much cash as he currently does, he did not see the opportunity to invest it.
"If he has to wait five years to spend it, he doesn't care. He said the problem with fund managers is we're all incentivised to put money to work… he was digging at traditional investors trying to get as many assets under management as possible, trying to put cash to work as quickly as they can so they can charge a fee for it… he'll put it to work when it makes sense, not so he can earn a fee from it."
Carlyon said Buffett was clear that most people were best to put their money into a managed fund or index fund and leave the investing to someone else.
Buffett told the crowd that he was not worried about quarterly or even annual numbers, but was instead thinking about where the investment would be in 10 or 20 years. He said people who focused on short-term numbers typically became unstuck at some point.
Carlyon said Buffett also told the conference Berkshire Hathaway had made a lot of money out of holding dry powder waiting for a downturn.
"We need to stay patient, we don't know when it will come, but we know it will come. "
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