Friday, November 10, 2006

Do You Want to Invest Like Warren Buffett?

One of the most common pieces of investment advice is to find a good investment and to simply hold on to it. Known sometimes as buy and hold investing, it doesn't seem to be working as well as it once did. A common response of buy and hold advocates is to point to the success of some of the famous value investors. The most famous of the contemporary value investor is Warren Buffett.

Given that, it's fair to as how Warren Buffett investments been performing recently. Everyone knows that he's had investment returns of over 20% per year since he started investing, even better depending on which period of time you review. Most of us would be quite happy getting those returns.

Now Warren Buffett does have a few advantages over the average investor. He doesn't just invest in stocks, he invests in companies. His practice is to buy a large stake in a company, and he then gets to name the CEO of the company, and gets to choose one or more board members. Most of us average investors don't need to worry about choosing who runs as board members or who would make a good CEO.

Now with all those advantages, it's fair to ask how well he's done in the past several years. A lot of Buffett's reputation is based on history stretching back to the early days of Berkshire Hathaway in the 1960's. How has the "Oracle of Omaha" and his buy and hold approach done in the past several years?

The holding company for the collection of companies that he owns is Bershire Hathaway. So we can easily judge his performance by looking at the stock price. The Class A shares have recently become infamous for being one of the most expensive stocks on earth (trading recently at over $100,000 a share).

To accommodate more "average investors" several years back they introduced the Class B shares, trading recently over $3000 a share. So, you if you want to invest like Warren Buffett, taking advantage of his inside connections, you can simply buy the BRK Class B shares.

Let's take a look at their performance. After the Class B shares started trading, they initially went up just like you would expect from a work class investor averaging over 40% a year in 1997 and 1998.
One of the most common pieces of investment advice is to find a good investment and to simply hold on to it. Known sometimes as buy and hold investing, it doesn't seem to be working as well as it once did. A common response of buy and hold advocates is to point to the success of some of the famous value investors. The most famous of the contemporary value investor is Warren Buffett.

Given that, it's fair to as how Warren Buffett investments been performing recently. Everyone knows that he's had investment returns of over 20% per year since he started investing, even better depending on which period of time you review. Most of us would be quite happy getting those returns.

Now Warren Buffett does have a few advantages over the average investor. He doesn't just invest in stocks, he invests in companies. His practice is to buy a large stake in a company, and he then gets to name the CEO of the company, and gets to choose one or more board members. Most of us average investors don't need to worry about choosing who runs as board members or who would make a good CEO.

Now with all those advantages, it's fair to ask how well he's done in the past several years. A lot of Buffett's reputation is based on history stretching back to the early days of Berkshire Hathaway in the 1960's. How has the "Oracle of Omaha" and his buy and hold approach done in the past several years?

The holding company for the collection of companies that he owns is Bershire Hathaway. So we can easily judge his performance by looking at the stock price. The Class A shares have recently become infamous for being one of the most expensive stocks on earth (trading recently at over $100,000 a share).

To accommodate more "average investors" several years back they introduced the Class B shares, trading recently over $3000 a share. So, you if you want to invest like Warren Buffett, taking advantage of his inside connections, you can simply buy the BRK Class B shares.

Let's take a look at their performance. After the Class B shares started trading, they initially went up just like you would expect from a work class investor averaging over 40% a year in 1997 and 1998.

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