Update: Back in the S&P 500
Are you lazy? I am, especially when I invest.
I bought pie dough for Thanksgiving dinner today instead of making it from scratch. I like baking and cooking, but today I just didn’t feel doing everything. Today is the biggest day at Boston Market, where my son works. He’ll be serving hundreds of lazy people their Thanksgiving meals.
If we weren’t all lazy, we’d have farms in our backyards instead of going to the grocery for food raw materials. Nowadays, you can get good and cheap prepared foods so even cooking is optional for most people. Capitalism is awesome.
Capitalism lets us be lazy. Someone is going to fill the void or enter a market and drive prices downwards. That’s why stock trades are under $10 today, and why you can choose to invest in a plethora of mutual funds. There are better and worse products and services. You get to choose, and the choices can be overwhelming. The Paradox of Choice is quite real.
Some of the greatest capitalists in the world live simple lives. Mark Zuckerberg famously wears the same thing every day. Warren Buffet lives in the same simple house he has owned for decades. They deal with tons of choices all day long in their day jobs, and that’s enough to help keep their mind active to help prevent Alzheimer’s.
Investing is work
Every day you are investing in your future. It might be, because you are building a business, furthering your career, or working hard to save as much as possible for retirement. For most people, work and home life are exhausting. The rest of their time they want to play and relax, and not spend time doing more work, say, on picking which stocks to buy.
Some people really like investing. They find it fascinating, and it is a great hobby for them. For example, I just read The Dhandho Investor by Mohnish Pabrai, which is a good book about value investing. Mohnish loves investing. I read this book, because my friend Guy Spier recommended it in his book The Education of a Value Investor. I read Guy’s book for fun, not to learn how to invest. (I know how to do that already.) Both books are full of interesting stories and history. I enjoyed them very much.
And, many more miillions of reams of bytes are dedicated to investing on the Internet, in books and in articles. All these bytes boggle my mind. Is the world as obsessed about investing as Mohnish and Guy? I doubt it. My guess is that most people just want to find the next tip that will make them rich.
That’s not investing, because investing takes more work than reading. Investing is not a passive activity. It’s a lot of work, in fact. Someone like Warren Buffet may “tapdance to work”, but when he’s there, he’s working hard to research, to evaluate, and to close potential deals.
How to Invest Like Warren Buffet
I bring up Warren Buffet, because his style of investing is back in fashion and getting a lot of press. Guy and Mohnish are disciples of Warren Buffet. Their books are filled with quotes from Buffet and Charlie Munger. They aren’t the only ones. Many people talk about how to invest like Warren.
However, emulating Warren Buffet is far too much work for me. Remember, it’s his full-time job. I’m not going to be as good as him. I certainly won’t have access to the deals he gets, like buying whole companies or owning chunks of large public companies. My tax situation will be complicated, because I’ll have to track the cost basis in my various investments. I’ll also worry a lot that I’m doing the right thing. That’s more of a personality thing for me, but it’s my experience that many people worry about their investments.
Mohnish has a solution to my problem: “To summarize, we could buy the S&P 500 Index or Russell 2000 Index and do better than the vast majority of active money managers. A better approach is to buy these indexes in a dollar cost-averaged manner. An even better approach is to go with the Magic Formula using Greenblatt’s approach with no adaptation or changes.” Or, you could invest in index funds, or … Many strategies are out there. What amazes me is that Mohnish doesn’t tell you the most obvious, low-risk, and lazy investment strategy of all.
Hire Warren Buffet
If you could hire Warren Buffet as your personal money manager, wouldn’t you? Even better, suppose you wouldn’t have to pay him a fee unless he made you money. What if, unlike other active money managers, you could put money in or take money out whenever you liked. That would be awesome, wouldn’t it?
Warren lets me do all that and more. I don’t get a 1099 or K1 at the end of the year from his fund. He puts his money where his mouth is: all his money is in his fund along with mine. His is probably the most watched investment firm in the world so I don’t have to worry about him running away with my cash like Bernie Madoff. He also writes a nice letter every year, and all his investors get invited to a party in Omaha.
You can be as lazy as me and hire Warren, too. It’s really easy: Just buy BRK-B. I wouldn’t bother with BRK-A, since it is a much less liquid investment. All my money is in BRK-B, and I sleep very well at night. I know that Warren is looking out for me.
Whew! That was more work I’ve spent on investing than I have in the last decade. Time to bake those pies.