Tuesday, March 26, 2013

Warren Buffet Invests Like A Girl Book Review

Warren Buffet Invests Like A Girl
tagline: And Why You Should, Too
Author: Louann Lofton
8 Essential Principles Every Investor Needs to Create a Profitable Portfolio

This was my first book specifically about Warren Buffet. I've perused some of his annual shareholder letters and I've read articles online, but never a book with his image on the front cover.
Louann Lofton works for www.fool.com and outlines the research that emerged about the differences in characteristic traits of men and women and how it affects investing behaviors, and consequently their rate of returns. This through lower trading volume(lower costs), longer time view, patience, less overconfidence.

Warren Buffett's investing characteristics are shown to mimic those of female investors and is credited with the reason for his phenomenal success. Additionally, there are several interviews with prominent female fund managers interspersed throughout the chapters that add real life examples of the principles being discussed.
Warning: Reading this book may elevate your desires to do your own research and try your hand at picking individual stocks for your investment portfolio.
But before you run away, thinking that it is blasphemy to consider investing in something besides a low-cost ETF or index fund, remember the idea of the "Core and Explore".
With the "Core" of your portfolio, i.e. a significant portion 85% to 95%, do the low cost asset allocation with your select ETF's and be happy. You'll be diversified, you'll get market returns, and all is well because you are exercising restraint because you know that you aren't smarter than the rest of the stock pickers out there.
Take the remaining 5% to 15% and "Explore" with it. Warren Buffett didn't become the Oracle by investing in safe, low cost funds. He researched and bought valuable companies that would benefit him in the long run. Try your hand. You might win some, you might lose some. And if you lose, it won't be your entire life savings.
The above principle was touched on briefly in the book, and I've seen variations of it posted before. I like this idea, and have set aside 5% of my portfolio to allow myself to try things out. It's a great learning experience. The key, and the book highlights this, is that when you buy stock, you are buying a piece of that company. Warren Buffett wouldn't consider owning shares of a company for only a few days, or even months. He's focused on the future earnings of that company. Additionally, he would never consider an investment without first becoming intimately acquainted. Research, research, research. If you find a company that is trading at a bargain, it will be the research that will give you staying power if that stock price dips further in the short term. You know you're not taking a risk, because you did your homework.
I found this quote particularly instructive.
US Hardcover, pg91
...Buffett said, "You can't do well in investing unless you think independently. And the truth is, you are neither right nor wrong because people agree with you. You're right because your facts and reasoning are right. In the end, that's what counts."

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