Hi Reader,

For long-term investors across the world, this is a highly anticipated time of year in which Warren Buffett releases his annual shareholder letter. Through the years, this tradition has yielded countless investing lessons we can use to become better investors.

While many investors read his letter searching for clues of which stocks to buy or sell—which is likely a path to disappointment—we focus our attention on things we can actually implement with success as Main Street investors. That is the lessons, philosophies, and ways of thinking about the world that can help us make more rational investing decisions.

But first,

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With that as our goal, I've picked four short quotes from this year's letter that speak to three of the enduring principles that I routinely share with you. I thought that hearing these same ideas from the greatest investor to ever live might offer valuable reinforcement. FYI: All italics are that of Mr. Buffett, while all bold emphasis is my own.

Lesson #1: Ignore ALL Market Forecasts

Buffett does not mince words here. He doesn't say we should sometimes ignore the pundits but that they should always be ignored. As prescient as they may sound, Buffett has constantly counseled that forecasts may tell you a great deal about the forecaster, but they tell you nothing about the future. We should never forget this.

Lesson #2: Be a Permanent (and Patient) Owner of Equities

In addition to emphasizing the long-term value of equities in the quotes below, Buffett also points out the value of 'sitting tight' (a.k.a. patience) not once, but twice in this year's letter. First:

Using just the data from his own investing history, it's easy to see that the historical record very much supports patience as a prudent long-term approach for diversified equity investors like us. This is why I so often repeat the adage, 'stay the course.' Now for the second mention of patience…

While I advocate for a globally diversified portfolio, I think Mr. Buffett would agree that owning many of the world's greatest businesses in virtual perpetuity—regardless of domicile—is a path that can lead to incredible wealth. Finally, the third and final lesson.

Lesson #3: If You Are Prepared, There's No Reason to Predict

This philosophy of 'preparation, not prediction' is evident in our financial plans. We routinely advocate for investing for our long-term goals by utilizing long-term assets (the great businesses noted in lesson #2) and short-term assets for your short-term goals. The latter part of that equation (what you have often heard me refer to as our "war chest") is what creates the conditions for patience so that we can ride out the periods of panic Buffett noted and that we can expect more of in the future.

Mr. Buffett is often referred to as the most admired yet least imitated investor, but I believe we can imitate him if we seek his wisdom, rather than tactics. My goal in sharing these thoughts is to do just that so that we can become more rational long-term investors.

I hope you found these to be helpful reminders.

Then, hit reply to this email with any questions. I read and respond to every message. 😃

Keeping Retirement Simple,

Eric Blake, CFP®

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