{"id":585,"date":"2016-02-03T09:00:24","date_gmt":"2016-02-03T14:00:24","guid":{"rendered":"http:\/\/www.investmentzen.com\/blog\/?p=585"},"modified":"2022-11-22T17:32:33","modified_gmt":"2022-11-22T21:32:33","slug":"warren-buffetts-advice-for-lebron-james","status":"publish","type":"post","link":"https:\/\/www.investmentzen.com\/blog\/warren-buffetts-advice-for-lebron-james","title":{"rendered":"Warren Buffett’s Advice For LeBron James (And You)"},"content":{"rendered":"

H<\/span>ave you ever received investing advice from a well-meaning friend or relative? Yeah, me too. If your experiences are like mine, and I’ll bet they are, most of the advice is\u00a0horrible.<\/p>\n

Here are some of my greatest hits:<\/p>\n

\u201cI know this great Internet company\u00a0called\u00a0CMGI! Buy the stock!\u201d<\/strong><\/p><\/blockquote>\n

– From a friend in 1999<\/p>\n

\u201cDon’t buy Google, the company is going nowhere.\u201d<\/strong><\/p><\/blockquote>\n

-From a co-worker shortly before the IPO in 2004. This co-worker would eventually go on to work for Google.<\/p>\n

\u201cBuy and hold investing is a bad idea. Options are the only way to make money.\u201d<\/strong><\/p><\/blockquote>\n

-From Uncle Larry, a misguided family member<\/p>\n

I took the CMGI advice and you can guess how that turned out. The internet\u00a0boom of the late 90s imploded and\u00a0the company quickly went bankrupt. Bye-bye $5,000<\/strong>.<\/p>\n

Luckily, I didn’t take\u00a0those other two pieces of advice. I bought\u00a0Google stock at IPO and hold it to this day (my best investment). I’m also a firm believer in holding investments for the long term. I buy for decades.<\/p>\n

A Strong Filter Will Serve you Well<\/h2>\n

We are bombarded with investment advice. Turn on the TV and you’ll see various talking heads yelling nonsense of all sorts:<\/p>\n

The stock market is doomed! Sell all your investments, stockpile food and move to a cave!<\/p><\/blockquote>\n

The S&P 500 will double before the decade is out. Reserve your Ferrari now!<\/p><\/blockquote>\n

<\/h3>\n

Often, you’ll hear these conflicting messages right after each other or see them on the same webpage. What is a rational person to believe?<\/p>\n

\"A<\/a>

A recent headline. Which is it?<\/strong><\/p><\/div>\n

Don’t believe any of it!<\/h3>\n

Almost all of this “news” is garbage and irrelevant to the everyday investor. The TV shows and financial websites have a self-serving\u00a0interest in selling ads and products<\/a>.<\/p>\n

The truth is that no one would tune in if instead of offering juicy stock picks<\/a>, the media reminded folks to hold onto their index funds. The best investing advice is just too boring for TV. Scary headlines get attention. Attention\u00a0gets ratings. Ratings earn money for the content producer.<\/p>\n

Realize this and you’ll be much<\/strong> better off.<\/p>\n

\"Ftv\"<\/a>

…said no financial news show ever<\/strong><\/p><\/div>\n

A Buffet of Buffett<\/h2>\n

However, that doesn’t mean that there aren’t good people with useful messages. You just have to know where to look.\u00a0One of my favorites is Warren Buffett, the most successful investor of all time.<\/p>\n

At first glance, you may not think that a billionaire would have anything useful to say to Average Joe Investor. Not true. Buffett’s simple and folksy wisdom has some very powerful messages for those willing to dig a little deeper. His advice\u00a0is timeless and applicable to everyone.<\/p>\n

Lesson #1<\/strong>: Successful investing is simple.<\/h2>\n

\u201cYou don’t have to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.\u201d<\/p><\/blockquote>\n

\u201cThere seems to be some perverse human characteristic that likes to make easy things difficult.\u201d<\/p><\/blockquote>\n

\u201cBusiness schools reward complex behavior more than simple behavior; but simple behavior is more effective.\u201d<\/p><\/blockquote>\n

\u201cI have always felt I was going to be rich because it’s not that difficult.\u201d<\/p><\/blockquote>\n

\u201cInvestors, of course, can, by their own behavior, make stock ownership highly risky. And many do.\u201d<\/p><\/blockquote>\n

Let’s Dig Deeper<\/h3>\n

Successful investing isn’t difficult. It requires no complex systems, expensive hedge funds or fancy advice. The media sells complexity, timing, fear and drama because easy<\/strong>\u00a0and calm<\/strong> don’t generate big stories.\u00a0Easy<\/strong>\u00a0also doesn’t justify hedge fund managers\u00a0making millions\u00a0per year or shouting “experts” on TV.<\/p>\n

Buffett knows that successful investing is simple<\/strong>.<\/p>\n

How you should act<\/h3>\n

\"WarrenBuffett was recently asked what advice he’d give to LeBron James<\/a>:<\/p>\n

\u201cJust making monthly investments in a low-cost index fund makes a lot of sense,\u201d Buffett said. \u201cOwning a piece of America, a diversified piece, bought over time, held for 30 or 40 years, it\u2019s bound to do well. The income will go up over the years, and there\u2019s really nothing to worry about.\u201d<\/p>\n

Buffett’s advice is backed up by research. There is a mountain of evidence\u00a0that shows that simple, easy and low cost index funds beat most expensive, actively managed investments<\/a>.<\/p>\n

The fact that Buffett is one of the most successful\u00a0investors of all time make his advice all the\u00a0more more powerful. Advising folks to buy into an index fund over his own company (Berkshire Hathaway)\u00a0shows the confidence Buffett has in the investment.<\/p>\nBuffett's advice to Lebron James: Just make monthly investments in a low-cost index fund. <\/a><\/span>Click To Tweet<\/a><\/span>\n

Bottom line<\/h3>\n

For most, the beautiful index fund is the right choice. You just can’t beat the simplicity, low fees and performance. For further reading, see Jack Bogle’s excellent book on the topic<\/a>.<\/p>\n

Lesson #2: Market timing is for suckers.<\/h2>\n
\"Someone

Via @InvestmentZen<\/a><\/p><\/div>\n

\u201cI have never met a man who could forecast the market.\u201d<\/p><\/blockquote>\n

\u201cThe most important quality for an investor is temperament, not intellect.\u201d<\/p><\/blockquote>\n

\u201cSomeone’s sitting in the shade today because someone planted a tree a long time ago.\u201d<\/p><\/blockquote>\n

\u201cOur favorite holding period is forever.\u201d<\/p><\/blockquote>\n

\u201cIn the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.\u201d<\/p><\/blockquote>\n

Let’s dig deeper<\/h3>\n

Pay attention to\u00a0the\u00a0news for any length of time and\u00a0you’ll see a prognosticator bragging about how he predicted the current downturn. What he didn’t tell you is that he’s been predicting that same thing every 3 months for the past 3 years.<\/p>\n

Never forget that a broken clock is right twice a day.<\/strong><\/p>\n

Successful investors don’t jump in and out of the markets because\u00a0of news headlines or market corrections. Anyone who tells you he can predictably time the market is full of hot air.<\/p>\n

How you should act<\/h3>\n

Stay the course. Repeat after me because this information is critically important to your success as an investor:<\/p>\n

Stay the course!<\/h3>\n

<\/h3>\n

Like most things in life, markets are cyclical. Downturns are natural and just how the system works. Don’t freak out and sell because Mr. Market had a bad day or bad month.<\/p>\n

Instead, feel good because you’re buying the same thing, but at a lower price.<\/p>\n

Bottom line<\/h3>\n

Ignore the whims of Mr. Market. Stay the course and don’t let today’s news dictate your actions. Think in decades, not days.<\/p>\n

(Related: How to Know When to Buy and Sell Stocks<\/a>.)<\/p>\n

Lesson #3: Money isn’t about stuff. It’s about freedom.<\/h2>\n

\u201cThere’s nothing material I want very much.\u201d<\/p><\/blockquote>\n

\u201cI really like my life. I’ve arranged my life so that I can do what I want.\u201d<\/p><\/blockquote>\n

\u201cLike Warren, I had a considerable passion to get rich, not because I wanted Ferraris \u2013 I wanted the independence. I desperately wanted it.\u201d\u00a0-Charlie Munger (Buffett’s Berkshire Hathaway partner)<\/p><\/blockquote>\n

Let’s dig deeper<\/h3>\n

Buffett’s and Munger’s values are reflected in their own lives. Both have lived in the same home for decades. Buffett’s home isn’t even worth $1,000,000<\/a>.<\/p>\n

As incredible as this sounds, the modest ways of Buffett and Munger are normal for the wealthy. The media sells us a picture of the rich that includes McMansions, $80,000 cars and pricey vacations in exotic lands.<\/p>\n

This picture is false. The Millionaire next Door<\/a> taught us that the wealthy are more likely to live in a modest home\u00a0and drive a Ford pickup truck.<\/p>\n

How you should act<\/h3>\n

Forget about keeping up with the Joneses. I have a secret for you; behind their fancy facade, the Joneses are broke and live paycheck-to-paycheck.<\/p>\n

The greatest thing about money is the freedom that it gives. The best life is lived\u00a0according to your plans, not your boss’s. The joy of the expensive car will quickly fade. The feeling of living your life on your own terms never ever gets old.<\/p>\n

Live below your means, especially when you’re young and your money has a long runway to compound. Never forget\u00a0the security and freedom that money will give you.<\/p>\n

Why would you want to keep up with the Joneses when you can blow them out of the water?<\/p>\n

Now it’s time for you to apply the lessons<\/h2>\n

\"WarrenIf you had invested $1,000 with Buffett back in 1965, you’d be worth over $10,000,000 today<\/a>. Not bad (let’s see Uncle Larry do that).\u00a0Take the lessons of Mr. Buffett to heart:<\/p>\n

Invest wisely<\/strong>. A\u00a0simple index fund will do very, very well for you.<\/p>\n

Invest for the long term<\/strong>. Plan to hold investments for decades. Fortunes aren’t made overnight.<\/p>\n

Let wealth free you<\/strong>. Never forget that money has the power\u00a0to enable your best life. Forget the big house and the shiny car. A big portfolio and old pickup truck will bring you much more happiness.<\/p>\n

I’m going to let Warren Buffett have the final word today. I leave you with one of his best quotes:<\/p>\n

\u201cToo often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.\u201d<\/strong><\/p><\/blockquote>\nThe asset I most value, aside from health, is interesting, diverse, and long-standing friends. <\/a><\/span>Click To Tweet<\/a><\/span>\n

You may also be interested in what is a good ROE (Return on Equity)<\/a>, Warren Buffett’s favorite valuation metric.<\/p>\n

Interested in IPOs?<\/p>\n