Warren Buffett’s Advices

Warren Buffett, considered to be one of the greatest investors in our time, is well liked. When he talks, millions of investors listen and follow. Over time, he has given consistent advices to average investors. For example, in his latest annual report published more than a week ago, Buffett again touted several well known principles. Among them, here are the two most widely quoted: 

• About stocks: Buffett advises average investors to buy and hold low cost index funds such as Vanguard total stock market index or Vanguard S&P 500 index fund (VFINX) instead of actively managed funds. 
• About bonds: “If you had to choose between buying long-term bonds or equities, I would choose equities in a minute.” 

However, since financial media have always sensationally reported on Buffett’s (Berkshire Hathaway) annual reports or for that matter, anything coming out of Buffett, it’s often more entertaining than scientific to understand his teachings. 

In this newsletter, we want to go into more details on the two points in the above. We also want to emphasize that it’s more important to understand our line of reasoning or the reasoning process to gain insights into his claims/teachings than just our conclusions.