Nit-bits in annual letter to Berkshire Hathaway shareholdersHis key principles: focus on what an investment will produce, not its price; stick to what you know; and don’t try to predict what the economy or stock market will do.
“You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognise your limitations and follow a course certain to work reasonably well,” Buffett wrote. “Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick ‘no.”
Buffett compared the stock market to having a moody farm investor shout out prices of Buffett’s farm every day.
“If his daily shout-out was ridiculously low, and I had some spare cash, I would buy his farm,” Buffett said. “If the number he yelled was absurdly high, I could either sell to him or just go on farming.”
But for investors who don’t have the skills or time to estimate the value of investing, Buffett repeated his standard advice: make regular purchases of a low-cost stock index fund.
“So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm,” he said.