WARREN BUFFET’S FOURTH-GRADE INVESTING STRATEGY – SHAME IT’S NOT TAUGHT IN SCHOOL!
WARREN BUFFET’S FOURTH-GRADE INVESTING STRATEGY – SHAME IT’S NOT TAUGHT IN SCHOOL!
Disclaimer: Good Day, Readers. WealthBuildingPowers blog is a financial literacy/competency blog and does not provide specific investment recommendations.
Warren Buffett on the investing strategy ‘you can learn in the fourth grade,’ but is ‘not taught in schools’
Warren Buffett has a trick for getting his money’s worth out of the stock market, and he says it’s a skill “you can learn in the fourth grade” — even though it’s “not taught in schools.”
At Berkshire Hathaway’s annual shareholders’ meeting on Saturday, Buffett recommended against obsessing over finding a perfect time to buy a stock. Rather, the Berkshire Hathaway CEO said, go ahead and invest, and then observe the stock market over time to see if you should buy more of that company’s stock or sell it.
Buffett said that he, longtime business partner Charlie Munger and other Berkshire Hathaway executives have long used this strategy because it has a higher chance of a return, and it alleviates some of the pressure of trying to predict the stock market. If the value of a stock dips after you buy it, Buffett noted, that means its shares have become less expensive — so buy more of them.
“We haven’t the faintest idea what the stock market is going to do when it opens on Monday,” Buffett said. “We’ve not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money.”
Using this strategy to navigate the stock market instead of trying to predict it, Buffett said, is almost like having an insurance policy in an often volatile market. Twice, he said, he’d tried to predict the market ahead of time — once in 2008 during the Great Recession, and again in March 2020 ahead of the Covid-19 pandemic crippling global markets.
Those decisions cost Berkshire Hathaway billions of dollars, he said.
“We were optimistic in 2008 when everybody was down on stocks,” Buffett noted. “We spent a big percentage of our net worth at a very dumb time. We spent about $15 or $16 billion, which was a lot bigger to us then than it is now.”
Buffett credited the navigation strategy to Berkshire Hathaway’s success: The company has a market cap of $704.29 billion as of Tuesday morning. By extension, the strategy would also then be responsible for Buffett’s status as a billionaire. The 91-year-old currently has a net worth of $115.2 billion, making him the world’s sixth-richest person, according to Forbes.
Another billionaire has followed a similar playbook: Tesla and SpaceX CEO Elon Musk, currently the wealthiest person. On Sunday, Musk tweeted familiar investing advice: “Buy stock in several companies that make products [and] services that you believe in. Only sell if you think their products [and] services are trending worse. Don’t panic when the market does.” This will serve you well in the long-term,” Musk added.
WARREN BUFFET USED THE ABOVE FOURTH GRADE STRATEGY TO ACQUIRE APPLE STOCK SHARES
The below table demonstrates how Warren Buffett grew his Apple stake from $7.10 Billion to $120.4 Billion. “go ahead and invest, and then observe the stock market over time to see if you should buy more of that company’s stock or sell it.”
| END OF YEAR | APPLE SHARES HELD | PERCENTAGE OF APPLE SHARES OWNED BY BERKSHIRE HATHAWAY | COST BILLIONS | MARKET VALUE APPLE HELD BY BERKSHIRE HATHAWAY END OF YEAR |
| 2016 | 61,242,652 | 1.1 | $6,747 | $7,093 |
| 2017 | 166,703,209 | 3.3 | $20,961 | $28,213 |
| 2018 | 255,300,329 | 5.4 | $36,044 | $40,271 |
| 2019 | 250,666,566 | 5.7 | $35,287 | $73,667 |
| 2020 | 907,509,761 | 5.4 | $31,089 | $120,424 |
| 2021 | 907,559,761 | 5.6 | $$31,089 | $161,155 |
CONCLUSION – WARREN BUFFET’S FOURTH-GRADE INVESTING STRATEGY – SHAME IT’S NOT TAUGHT IN SCHOOL!
Warren Buffett is my best lifetime investment mentor and role model.
READ AND LISTEN TO MR. BUFFET TO GAIN YOUR FINANCIAL FREEDOM!
After almost 20 years of education, I expected more financial and investment literacy. I was disappointed. One of many great traits my parents taught me is that if you want something, get off your behind and work for it. Warren Buffett outlines a strategy a fourth grader can understand.
- Find a great company and research it. Confirm it is a company with good products and great leaders. Great companies increase sales!
- Buy some of this great company’s stock.
- Periodically reevaluate this company. If you still believe in this company and the price has fallen- buy more. Same if the price has gone up.
- Stop looking for the next great company when you have identified a great company. Keep buying the stock.
- When the next great company is spotted, start at step # one and repeat.
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I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an NC. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
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