Summary List Placement
Warren Buffett’s nuggets of wisdom have helped plenty of people make money. Blair duQuesnay, an investment advisor at Ritholtz Wealth Management, parlayed one of the billionaire investor’s most famous tips into purchasing her first home.
She joined Buffett’s army of admirers while in college. Inspired by the Berkshire Hathaway CEO’s stellar track record, she soon tried her hand at stockpicking.
“Following Buffett’s ‘buy what you know’ advice, the first stock I bought was Nordstrom’s department store,” duQuesnay wrote in her contribution to “How I Invest My Money,” a collection of short essays by 25 finance experts about how they manage their personal wealth. The book, edited by Ritholtz CEO Josh Brown and author Brian Portnoy, will be published on November 17.
“A few years later, I violated Buffett’s suggested holding period of ‘forever,’ when I sold the stock to put down a deposit on a studio apartment in midtown Manhattan,” duQuesnay continued.
The fledgling investor told Business Insider that she bought Nordstrom’s stock in mid-2004 and sold it in May 2006, scoring a roughly 80% return. “It felt good to have a winner, but I am confident my return was purely luck, not skill,” duQuesnay said in an email.
The financial advisor revamped her strategy after reading “Winning the Loser’s Game” by Charles Ellis in 2009. The book pointed out that the majority of investors fail to consistently beat the market, so owning the index and earning the market return is a better bet than buying single stocks.
Taking that lesson to heart, duQuesnay hasn’t bought an individual stock since. She used Buffett, who has made billions with shrewd stock picks, as an example of why she sticks to indexes.
“There are no shortcuts for the work he does to value an investment,” she told Business Insider. “I think many personal investors lose sight of the fact that their part-time hobby is Buffett’s 70+ year vocation.”
“Even though I am a financial advisor, I do not spend enough time researching individual companies to be an adequate stock picker,” she added.
The Berkshire chief wholeheartedly agrees with duQuesnay. “In my view, for most people, the best thing to do is to own the S&P 500 index fund,” he said at Berkshire’s annual meeting in May.
That approach lets them gain exposure to a broad cross-section of American businesses without having to pay hefty fees to fund managers, he explained. It also saves them from massive losses if one of their holdings tanks in value, at the cost of missing out on potentially outsized returns.
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Source:: Business Insider