Buffettism

Buffett has said many influential things over the course of his career. His annual reports for Berkshire Hathaway are widely circulated, and people from across the globe come to Omaha each year for his annual shareholders’ meeting. But this quote is probably my favorite: “It is not necessary to do extraordinary things to get extraordinary results.”

Now, it seems appropriate that this extraordinary man, who is worth over $70 billion, also famously enjoys the unextraordinary things in life—his favorite meal is a cheeseburger with a Cherry Coke. He is a living contradiction, so it’s unsurprising that he would say something like this. But what does he mean? How can you expect extraordinary results from ordinary actions? The answer: consistency.

Many people want to hit a home run with a one-time investment, so they try to predict the next Apple (up 4,700 percent since its IPO) or Google (now Alphabet up 1,700 percent since its IPO). But as you know if you’ve read Moneyball by Michael Lewis, it’s much better to just consistently get on base. So what does that look like in your financial life?

Save a little bit of money every month, invest that money in a balanced and efficient portfolio of stocks and bonds, and then wait—and that’s the most crucial part. Compounding interest and capitalism are the two most powerful tools in creating wealth, but they don’t work overnight.

As Buffett also says, “Our favorite holding period is forever.” It’s so simple, yet people find it incredibly difficult to just wait on their investments to grow. Naturally, they feel like they should be doing something, but inaction is often the most powerful move. In fact, even if you had terrible timing and entered the market in 2008, if you just invested in an S&P 500 index fund, you would be up over 100%.

The plan is simple--consistently save a little over a long period of time and watch it grow. If you do that, you will eventually become an extraordinarily wealthy person.

 

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@LeFleurFinancial.com.