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Why Not Do What Warren Buffett Does? Thumbnail

Why Not Do What Warren Buffett Does?

Written by Lee Stoerzinger, CFP®

If someone were to ask who is the greatest investor of all time, more than likely the name Warren Buffett will come up. Often called “The Oracle of Omaha," Buffett and his company, Berkshire Hathaway, have done extremely well over the years and their annual meetings have almost a cult following. Make no mistake that he deserves all of the praise he earns. Berkshire Hathaway’s Class A shares are over $300,000 per share.

With all of this long-term success in mind, Mr. Buffett has been known to share his general thoughts beyond his own company, on things like the markets, investing, taxes, etc. For example, he has mentioned his strong belief that investors should just buy low cost index funds. This has led to many discussions with clients and friends who may argue that if the best investor in the world does something, why wouldn’t it be good for them?

While we are always open to a good discussion on investing and the markets, there are several reasons why the things Warren Buffett does may not always be perfectly beneficial to you. First, he is running a perpetual holding company which will last beyond his and many other lifetimes, and he invests that way. On the flip side, we all have to plan for a specific lifetime of goals, such as saving, retirement, etc. and need to work within the boundaries of the economic landscape and timeframes that fill our lives.

Second, every relationship we have is unique, and we do not believe one investment plan or theory is right for everyone we work with. We believe there are different tools for different market environments and we apply them accordingly.

Third, Mr. Buffett’s personal financials are in a different league and it can be difficult to simply overlay the tools he uses in most people’s lives. We often need to create income for retirement, use the available traditional channels to reduce taxes, or invest to protect what we spend our lives building. He gains billions in dividends, doesn’t distribute any to his shareholders, and gifts his stock to avoid paying taxes on the gains. Not to say we don’t use some of the same tools he uses, as we often do. But not with the same flexibility and impact he has available.

In closing, and in reality, this article isn’t really about Warren Buffett. It is more a message about how much information is out there, and how we must be diligent in turning it into knowledge that has a positive impact on our lives. The world of finance and investments is complex and taking things to a deeper level can often make all the difference.