A recent Validea blog outlines the following eight lessons Warren Buffett has taught Berkshire Hathaway shareholders— that may have kept them loyal through recent years of lagging performance:
- Education: The consistent messaging in Buffett’s annual letters to shareholders that advocates for “long-term buying of good businesses at what are hopefully reasonable prices, controlling your temperament and believing in the U.S. stock market and corporate America over time.”
- Keeping Emotions at Bay: Buffett is steadfast in his messaging that successful investing requires “a sound intellectual framework for making decisions and the ability to keep emotions from corroding the framework.”
- Optimism: Buffett consistently maintains his upbeat outlook on American business. “He may not always think stocks are cheap, but the idea that as a country and economy we are advancing, and the cash flows generated by corporate America will be higher in the future are continuous reminders from Buffett.”
- Buying on sale: Each time stock prices fall, “history would tell you this presents an opportunity to buy more stocks at lower valuations and future expected returns go up, not down, but often times investors let fear govern their decisions and they sell stocks after most of the damage is done.”
- Investment process: Buffett evolved from a “deep value” investor (looking for cheap stocks) to a “quality” investor (looking for great businesses at attractive prices), which opened up a much larger universe of opportunities.
- Fees: Buffett has always been critical of high fees charged by investment firms and expensive products.
- Simplicity: Buffett stays within what he calls his “’circle of competence” when he invests, avoiding stocks that he doesn’t clearly understand. “Take a look at Berkshire’s acquisition criteria and you’ll get a sense on the value Buffett places on keeping deals simple, fair and straightforward.”
- Give Back with Humility: Buffett has committed to donating most of his wealth to charitable causes and, despite being one of the world’s wealthiest people, lives a humble lifestyle.