Warren Buffett is one of investing’s all-time greats. But according to theCEO of Berkshire Hathaway (NYSE:BRK.B), investing success isn’t about being smarter than everyone else.
According to Buffett, the intellectual barriers to entry are actually pretty low. So I think it actually is possible for most people to invest like Oracle of Omaha – if they want to.
IQ
At a Berkshire Hathaway Annual Meeting, Buffett once said that investors with an IQ of 150 should sell 30 points to someone else. It’s not necessary for achieving good returns.
What matters, according to Buffett, is having the right temperament. That means avoiding being impulsive, impatient, or taking on unnecessary risks to try and boost performance.
In other words, finding stocks to buy doesn’t come down to knowing more than everyone else. It’s about being patient enough to wait for opportunities to present themselves.
In this sense, at least, I think most people have it within their capabilities to invest like Warren Buffett. Whether they will or not is another question, but I’m convinced they can at least.
Opportunities
Analysts often point out that finding big enough opportunities to support future growth is a challenge for a company of Berkshire’s size. And this is one of the main risks with the stock.
Most of the stocks the average investor can buy just aren’t big enough to make a difference to the firm. But the organisation’s size does bring some unique opportunities.
Recent Buffett moves have included buying a chemicals business from Occidental and investing in Japanese trading houses. These aren’t things the average investor can emulate.
Unlike having a high enough IQ, this looks like a major obstacle for investors trying to invest like Warren Buffett. But it’s eminently surmountable for those who want to find a way.
Berkshire Hathaway
The easiest way to invest like Warren Buffett is just to buy shares in Berkshire Hathaway. In doing so, investors pick up the opportunities – and threats – of Buffett’s company in one move.
Investors need to ask themselves whether the long-term potential rewards outweigh the risks. I think they do, which is why the stock is the largest investment in my Lifetime ISA.
I see the company’s huge cash reserves as a significant competitive advantage. But a lot of investors will want to see this being used sooner rather than later.
This, however, illustrates Buffett’s point about patience as the key attribute for investing success. Opportunities might not show up right away, but I’m confident they will eventually.
Succession
There’s an obvious question about what happens at Berkshire when Buffett retires at the end of the year. But my sense is that most of the company’s key strengths will remain intact.
The firm will retain its balance sheet and its strong financial position. And this is what I think gives it unusual opportunities to take advantage of.
What will depart (eventually) is Buffett’s unique insight. But if patience matters more than intelligence, I think the company should be able to do well under new management.
That’s why I think Berkshire Hathaway shares are the best way to invest like Warren Buffett. It doesn’t take much IQ to figure that out, but that’s sort of the point.
