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Buffett's advice: Treat stocks like real estate
NEW YORK - Mr Warren Buffett, the billionaire chairman of Berkshire Hathaway, cited a farm he has owned since 1986 to caution individuals against frequent buying and selling of stocks.
Investors should treat their equity holdings like real estate purchases, focusing on the potential for profits over time rather than short-term price fluctuations, Mr Buffett, 83, wrote in an excerpt from his annual letter published on the website of Fortune magazine on Monday.
"Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations," Mr Buffett said. "For these investors, liquidity is transformed from the unqualified benefit it should be to a curse."
Mr Buffett has pursued a buy-and-hold investment approach as he built Omaha, Nebraska-based Berkshire into a US$280 billion company, accumulating the largest holdings of Coca-Cola, American Express and Wells Frago. He has said individual investors may be better off avoiding his approach to picking stocks, instead purchasing a fund that holds every company in the Standard & Poor's 500 Index.
"The goal of the non-professional should not be to pick winners," Mr Buffett wrote: "The 'know-nothing' investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results."
The S&P 500 has returned about 7 per cent annually over the past decade, beating by almost a percentage point the average yearly advance of Mr Buffett's company. He has said he aims to increase Berkshire's book value, a measure Berkshire's book value, a measure of assets minus liabilities, more rapidly than the S&P 500.
Mr Buffett's record of profitable stock picks and takeovers has helped make his letters a must-read on Wall Street. He has said he writes them to be understood by his sisters, who do not work in finance. The full document may be released by March 1, along with financial results for 2013.
BLOOMBERG
NEW YORK - Mr Warren Buffett, the billionaire chairman of Berkshire Hathaway, cited a farm he has owned since 1986 to caution individuals against frequent buying and selling of stocks.
Investors should treat their equity holdings like real estate purchases, focusing on the potential for profits over time rather than short-term price fluctuations, Mr Buffett, 83, wrote in an excerpt from his annual letter published on the website of Fortune magazine on Monday.
"Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations," Mr Buffett said. "For these investors, liquidity is transformed from the unqualified benefit it should be to a curse."
Mr Buffett has pursued a buy-and-hold investment approach as he built Omaha, Nebraska-based Berkshire into a US$280 billion company, accumulating the largest holdings of Coca-Cola, American Express and Wells Frago. He has said individual investors may be better off avoiding his approach to picking stocks, instead purchasing a fund that holds every company in the Standard & Poor's 500 Index.
"The goal of the non-professional should not be to pick winners," Mr Buffett wrote: "The 'know-nothing' investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results."
The S&P 500 has returned about 7 per cent annually over the past decade, beating by almost a percentage point the average yearly advance of Mr Buffett's company. He has said he aims to increase Berkshire's book value, a measure Berkshire's book value, a measure of assets minus liabilities, more rapidly than the S&P 500.
Mr Buffett's record of profitable stock picks and takeovers has helped make his letters a must-read on Wall Street. He has said he writes them to be understood by his sisters, who do not work in finance. The full document may be released by March 1, along with financial results for 2013.
BLOOMBERG
