Berkshire Hathaway says 'Get Boring'

Filed in archive Investing on March 24, 2005

Berkshire Hathaway's 2004 annual report came out a few weeks ago. If you'd like to read it you can find it here. Warren Buffett has put together one of investing's all star performances. Even the small investor can pull a nugget or two out of his writings.

I wanted to pull out two powerful paragraphs that, if you strictly observe and execute their teachings, are probably more valuable than anything else you'll ever learn about investing.

"Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.

There have been three primary causes: first, high costs, usually because investors traded excessively or spent far too much on investment management; second, portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and third, a start-and-stop approach to the market marked by untimely entries (after an advance has been long underway) and exits (after periods of stagnation or decline). Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful."

So get boring baby. And love it.