Many people think, what , Buffett is a passive investor, who keeps everything for a long time, but, it turns out this is not entirely true.
The Myth of Warren Buffett. This is the myth that you can beat the market by picking value stocks and just buying and holding. Just like old Warren does! Except, that’s not at all what Warren Buffett does. Buffett runs one of the most complex multi-strategy investment portfolios that exists in the world. It’s essentially a dynamically leveraged option writing, dollar cost averaging, active management, distressed asset approach.
Berkshire is brilliantly constructed. Buffett is the master of portfolio construction. What he’s not is the little old value stock picker from Omaha who just sips Cherry Coke and says “ohhh, that’s yummy, I think I’ll buy some of that!”. But that’s basically the pitch Wall Street has been sold and sold on to you. It’s the “we can all be like Buffett if you buy into this fund that mimics his approach – but really we can’t come close to mirroring his approach!”. The result is excessive fees and competing with an index that is a perennial ass kicker (the S&P 500 which just so happens to be a compilation of, oh, 500 of the greatest corporations the world has ever seen out of millions, mind you).
The point is, Buffett has a competitive advantage through masterful portfolio design. Most managers can’t say that. And that’s the biggest problem with Wall Street today. Too much myth chasing. Not enough real value add. It’s no wonder the ETF business is growing so quickly as investors slowly catch-on….
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