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Another key point is that it is not about BEATING the market year in and out. It is about limiting risk. “Rule #1, never lose money. Rule#2, never forget Rule #1″- Warren Buffett. Index funds will have long periods of negative growth at some point. There are many investments available paying 7%+ with little risk. I will take a diversified portfolio of income bearing investments each year, and let everyone else watch their S&P fund crash and recover repeatedly losing out on compunded annual growth.

I would encourage people to look into WB’s actual investment strategies, but then again if you don’t want to mess with anything…

This is just my personal opinion, but while I hero-worship Buffett and strive to learn as much as I can from him, the truth is, I think Berkshire shares are currently over-valued. Oh yeah, I went there.

Why do I think this? In short, Buffett has become more than an iconic investor or even a household name. Like it or not, he has also become Berkshire’s best-selling brand! And he doesn’t seem to mind at all!

I think the picture that paints this most vividly is the cable documentary I once saw called, “The Billionaire Next Door”. I’m sure many of you have seen it too. In short, I think the Buffett name (and the plays he make) artificially drives sales more than is normally possible simply because of the Buffett name. (That is not a bad thing per se right now, but bear with me.)

Buffett himself also points to two other signals that suggest to me that if he was in our shoes, he would not invest in Berkshire right now.

The first is that he said it’s a lot harder to move the % needle with billions rather than with thousands. The sheer size of his company’s fortune makes his choices much more limited.

The second is that Buffett targets companies that are not only solid, but are inherently undervalued (read: overlooked by the rest of the market). Does Berkshire Hathaway pass this simple litmus at this point in time? Need I state the obvious?

In his shareholder letters, Buffett has also warned about slowing growth in the short-term, but here is the thing that really struck me:

Both Buffett and Munger are not exactly young. I mean, they still seem quite sharp and fit for men of their age, but seriously…. And have you seen their diets too? Buffett may be frugal, but his diet would give any Nutritionists an early heart attack.

I hate to say it, but in all seriousness, the reality is that Buffett could have a heart attack at any moment. And while succession plans have already been put in place, there is no doubt in my mind that Berkshire’s current stock price would seriously suffer from the loss of the Buffett brand.

Because of this, in my personal opinion anyway, I highly doubt that Buffett would invest in Berkshire right now if he was in our shoes.

I think what is much more important is to learn as much as we can from this living legend while he is still here with us, and to enlighten and empower our generation and the next so that we too can be our own Buffett.

Sometimes the simplest answers are right in front of you!

Well, let’s not beat around the bush. Buffett is a better investor than the vast majority of us. It’s as simple as that. Yes, he does things differently from us, but that’s because he is able to mitigate the risk that most everyone else would be exposed to simply because of his skill level. And hence, he is also able to enjoy the higher return.

Truth is, Buffett’s investment style is also notoriously cautious. And I don’t think he’s being hypocritical by saying that a 30 year old (with an assumed investing knowledge of an “average” 30 year old) should just focus on low cost index funds. Again, it’s following his belief that one should invest into the market, not constantly try to out-smart it.

To do the latter would require what Buffett believes to be an extraordinary amount of time, energy, and intellectual effort towards such pursuit. It’s something that not everyone has the time nor the opportunity to do so.

However, if you do have the time, energy, and passion for it, then he has said that one should not diversify at all. Quoting from one of his speeches, “5 to 6 positions is all you need.”

Buffett made his money through company takeovers/risk arbitrage and being a fierce negotiator for his company/shareholders….not by investing in an index fund.

This is a classic case of being quoteable, but not correct. By the way, I’m honestly a huge WB fan! Below is the url to more of his famous quotes…
http://en.wikiquote.org/wiki/Warren_Buffett

Anyways, I was about to say that I’d throw it in some AAA bonds and keep doing what I do. I’m 23 and I love my job

I especially like his simple but elegant answer of index funds and getting back to work.