Want to invest like Buffett?

1. Investment advisory services provided by BAM Advisor Services, LLC d/b/a Loring Ward (“Loring Ward”).
WANT TO INVEST LIKE BUFFETT?
START TAKING HIS ADVICE

2. Warren Buffett’s Advice
Should you use active or passive mutual funds?
Should you pay attention to market forecasts?
Should you try to engage in market timing?

3. Buffett on Active vs. Passive Investing
“Most investors, both institutional and
individual, will find that the best way to
own common stocks is through an
index fund that charges minimal fees.
Those following this path are sure to
beat the net results (after fees and
expenses) delivered by the great
majority of investment professionals.”
~ 1996 Berkshire Hathaway Chairman’s Letter

4. “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.”
~ 2004 Berkshire Hathaway Chairman’s Letter
Buffett on Active vs. Passive Investing

5. Buffett on Active vs. Passive Investing
“By periodically investing in an index
fund, the know-nothing investor can
actually outperform most investment
professionals.”
~ 1993 Berkshire Hathaway Chairman’s Letter

6. Three Primary Causes
High costs
Decisions based
on tips and fads
A start-and-stop
approach

7. Buffett on the Value of Forecasts
“We’ve long felt that the only value
of stock forecasters is to make
fortune tellers look good. Even
now, Charlie (Munger) and I
continue to believe that short-term
market forecasts are poison and
should be kept locked up in a safe
place, away from children and also
from grown-ups who behave in
the market like children.”
~1992 Berkshire Hathaway
Chairman’s Letter

8. Buffett on the Value of Forecasts
“A prediction about the direction
of the stock market tells you
nothing about where stocks are
headed, but a whole lot about the
person doing the predicting.”
~Morningstar

9. Before You Act on a Forecast, Ask Yourself:
Is Warren Buffett acting on this expert’s opinion?
If he isn’t, should I be doing so?
What do I know that Buffett doesn’t?
If I make this change and I am right, what impact will it
have on my life?
What impact will it have if I am wrong?
Have I been wrong before?

10. Buffett on Market Timing
“Our stay-put behavior reflects our
view that the stock market serves
as a relocation center at which
money is moved from the active to
the patient.”
~ 1991 Berkshire Hathaway
Chairman’s Letter

11. Buffett on Market Timing
“Inactivity strikes us as intelligent
behavior.”
~ 1996 Berkshire Hathaway
Chairman’s Letter

12. Buffett on Market Timing
“We continue to make more money
when snoring than when active.”
~ 1996 Berkshire Hathaway
Chairman’s Letter

13. Buffett on Market Timing
“Our favorite holding period is
forever.”
~ 1988 Berkshire Hathaway
Chairman’s Letter

14. @2013 Behavior Gap

15. @2013 Behavior Gap

16. Investors Idolize Buffett, but Don’t
Follow His Advice

17. Buffett Admonishes Against
Market Timing, However…
Buy when others are fearful, sell when they are greedy
Don’t sell when valuations are low
Buffett buys because expected returns are high
“Whether we’re talking about socks or stocks,
I like buying quality merchandise when it is
marked down.”
~2008 Berkshire Hathaway Chairman’s Letter

18. Three Primary Causes
HAVE
DISCIPLINE
IGNORE YOUR
EMOTIONS
REBALANCE
REGULARLY
ADHERE TO YOUR
INVESTMENT PLAN

19. The Loser’s Game
The Winner’s Game
Buy high
Buy low
Yesterday’s winners
“Jum
p on the bandwagon!”
Yesterday’s losers
“Abandon ship!”
Yesterday’s losers
Yesterday’s winners
Sell low
Sell high

20. You Can Invest Like Buffett
Understand How to Think About Bad News

21. You Can Invest Like Buffett
How to Think About Bad News
Markets should continue to fall only if future news is worse than expected
If the news is no worse than expected, you should expect to earn high returns
because valuations had been low
If the news is not as bad as expected, the perception of risk will fall, prices
should rise and you should expect to earn high returns

22. You Can Invest Like Buffett
How to Think About Bad News
Surprises
What matters are surprises
If something is a surprise, by definition it cannot be forecasted
Happy surprises are as likely as unhappy surprises

23. You Can Invest Like Buffett
Avoid Stage-One Thinking

24. You Can Invest Like Buffett
Avoid Stage-One Thinking
Will governments/central banks stand idly by, allowing the crisis to worsen?
Do I really know something that the market doesn’t know?
Doesn’t the market’s current price already reflect the news I am reacting to?
Do I want to sell when valuations are low and expected returns are high?
When I reacted in the past to such events, how did it turn out?
If I sell during a crisis, how will I know when it is safe to buy again?

25. Buffett on Temperament
“Once you have ordinary
intelligence, what you need is the
temperament to control the urges
that get other people into trouble
in investing.”
~Businessweek

26. You Can Invest Like Buffett
Have a Plan and Stick to It

27. You Can Invest Like Buffett
Have a Plan and Stick to It
Resist acting on forecasts
Resist trying to time the market
Give up the hope of outperforming by investing with the latest hot fund manager
Hit the mute button if you cannot resist watching financial media
Be a “passive” investor

28. Want to Invest Like Buffett?
Use a passive, evidence-based investment strategy
Tune out all the economic and market forecasts
Don’t try to time the movements of markets
Develop a written IPS based on your need,
ability and willingness to take risk
Control your emotions in order to maintain discipline
Review your plan whenever the underlying assumptions change

29. i"�Nfl> Yw
CAN
e�OL-
@2013 Behavior Gap

30. (§)2013 Behavior Gap

31. The principals of Capital Associates Wealth Management, as individual financial advisers with Eagle Strategies LLC, a Registered Investment Adviser, offer their clients the services
of Loring Ward, third party money manager available on Eagle Strategies Investment Management platform. Capital Associates Wealth Management, Eagle Strategies and Loring
Ward are independently owned and operated.
LWI Financial Inc. (“Loring Ward”) is an investment adviser registered with the Securities and Exchange Commission. Securities transactions are offered through its affiliate, Loring
Ward Securities Inc., member FINRA/SIPC.
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Capital Associates
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Bethesda, Maryland 20817
(301) 581.4108
info@capitalassoc.net
Rob Ugiansky
robert@capitalassoc.net
(800) 601.5281
Mitchell Katz
mkatz@capitalassoc.net
(800) 601.5281
http://www.capitalassoc.net