Opinion

John Wasik

Can you really invest like Warren Buffett?

Dec 17, 2012 20:18 UTC

CHICAGO (Reuters) – For as long as I can remember, the investment maxim that most evokes a mix of adulation and performance anxiety is “Invest like Warren Buffett.”

How can mere mortals emulate an investing deity? In truth, most of us will never come close to “the Sage of Omaha.” He’s done all the things a stellar investor should do: He buys when there’s blood in the street, finds solid companies at great prices and keeps them “forever.” Lacking Buffett’s phenomenal verve and mettle, though, most of us won’t do this. But that doesn’t mean we’re doomed to failure.

Fortunately, the multibillionaire chairman and chief executive of Berkshire Hathaway Inc. has been generous with his wisdom and two recent books published in November compile and analyze it elegantly: “Tap Dancing to Work” by Carol Loomis, a long-time Fortune writer and Buffett friend and “Think, Act and Invest Like Warren Buffet” by Larry Swedroe, principal and director of research for Buckingham Asset Management, LLC.

What key advice resonates most?

1. Stick with index funds

Although you probably won’t get the returns of Berkshire Hathaway with index funds, you can still get pretty close to market returns without having to be an oracle yourself.

“If individuals “aren’t going to be an active investor — and very few should try to do that — then they should just stay with index funds. Any low-cost index fund,” Loomis quotes Buffett as advising. “And they should buy it over time. They’re not going to pick the right place and time.”

Looking beyond emerging markets to ‘frontier’ economies

Dec 14, 2012 13:30 UTC

CHICAGO, Dec 14 (Reuters) – With China, Brazil and India
hitting icy patches on their economic growth paths, investing in
even younger emerging markets looks promising.

The so-called “frontier” economies offer diversification and
profit opportunities as big global investors look for low-cost
labor and resources. Most of these 25 or so countries won’t
appear on most individual investors’ radar screens, though. They
range from Bangladesh to Vietnam and are expanding due to
industrialization or global demand.

Vietnam, for example, benefiting from normalized relations
with the U.S. and membership in the World Trade Organization, is
one of the only Asian countries to have grown faster than China
since 2000, according to the McKinsey Global Institute. The
country’s manufacturing sector alone grew at a 9-percent annual
compounded growth rate from 2005 to 2010.

How to invest if the ‘fiscal cliff’ bears are wrong

Dec 10, 2012 17:15 UTC

CHICAGO, Dec 10 (Reuters) – Let’s assume, for a moment, that
the “fiscal cliff” bears are wrong.

Underlying pending tax increases and more debt-ceiling
battles is some fairly positive economic news. Job growth
surprisingly soared last month and U.S. home prices in October
posted their biggest increase in six years, according to
CoreLogic. Factory orders also rose unexpectedly during the
month. And the Federal Reserve’s stimulus policy is keeping
mortgage rates low.

That all bodes well for a low-growth, sustainable recovery
in which basic materials, industrials, emerging markets and even
utilities regain favor. The upswing in employment and personal
income will translate into a substantial consumer wealth effect,
and more people will be spending money on homes, autos,
appliances and consumer goods. Overseas, the rising U.S. tide
will lift emerging markets. Renewed confidence combined with
secular economic growth represents “a likely catalyst for the
next multi-year bull market,” notes the BMO Private Bank 2013
outlook for financial markets.

Investing in the New China Syndrome

Dec 6, 2012 20:17 UTC

CHICAGO, Dec 6 (Reuters) – One of the ways to globalize your
portfolio and to tap growth in emerging markets is to recognize
the new China Syndrome. The world’s most populous country is
becoming a primary buyer for resources and technologies for its
growing population.

China’s growing demand will continue to boost prices on
everything from farmland to oil. The country now consumes more
than 40 percent of the world’s base metals, 23 percent of major
agricultural commodities and 20 percent of non-renewable energy
resources, according to a recent report by the International
Monetary Fund. Those figures are up from single-digit levels in
2000, in terms of net imports as a percentage of world imports.

There are a number of ways to invest in this trend through
exchange-traded funds, but first you need to understand the
breadth of its global implications.

Why you need to sidestep Apple stock in tech investing

Dec 3, 2012 19:34 UTC

CHICAGO, Dec 3 (Reuters) – It’s easy to believe in
technology stocks again.

After a dismal recession and sluggish recovery, the sector
is up 13.3 percent this year through Nov. 30, according to
Standard & Poor’s, slightly ahead of the broader S&P 500 Index.
Expect that run to continue, since gadget-buying will be strong
this holiday season and may continue into next year.

Yet the question for tech investors is whether Apple Inc
should remain a key holding. The stock already
dominates most tech portfolios because of its mammoth market
capitalization, making it one of the most valuable companies on
the planet. Apple is still the largest holding in the S&P 500
and peaked above $700 a share back in September. It’s been
trading below $600 since late October.

Four reasons dividends won’t fall off ‘fiscal cliff’

Nov 30, 2012 16:58 UTC

CHICAGO, Nov 30 (Reuters) – With a tax increase on dividends
and capital gains looming, high-dividend paying stocks may hold
up well – even if investment income rates climb on Jan. 1.

Unless Congress acts by the end of the year, taxes on
dividends will automatically rise from the current 15 percent to
as high as 39.6 percent. While that sounds like a draconian
increase, it should not discourage investors from owning
high-dividend paying stocks nor should it trigger a lasting
market decline.

You can blame inertia, but individual investors are likely
to stick with their dividend stocks anyway. And those who do may
even be rewarded for the fear factor of higher rates. Companies
like Wal-Mart have moved up dividend payments to
December. Others like Costco, Wynn Resorts and
Tyson Foods are declaring special dividends, some of
them quite substantial.

Nervous Nellies take safe road to capital preservation

Nov 26, 2012 16:56 UTC

CHICAGO, Nov 26 (Reuters) – Nervous Nellies can’t stand
losing money, so they typically hedge their portfolios with
investments seeking to preserve capital. With the fiscal cliff
looming, there are a lot more of these worriers out there who
are (temporarily) looking to put together worst-case scenario
portfolios.

Whether you think that the fiscal cliff crisis won’t be
resolved by the end of the year or fear inflation, a
calamity-proof portfolio can hedge against any number of perils.
This would be a prudent approach for anyone primarily focused on
capital preservation or a subset — possibly 40 percent — of a
larger portfolio in which you need to temper stock-market risk.
You can create it yourself or buy it off the shelf in the form
of a mutual fund.

When looking to safeguard your money, keep in mind that this
is not an aggressive or moderate growth portfolio. If you’re
young, can afford to take some risk or have a solid guaranteed
pension waiting for you, this is not an ideal strategy for you.

Community loan funds mix charity with social capitalism

Nov 23, 2012 16:13 UTC

CHICAGO, November 23 (Reuters) – When you are deciding how
to allocate your charity dollars before the end of this year,
you might want to consider investing in a community development
financial institution (CDFI).

There are nearly 1,000 private-sector community development
financial institutions that operate in all 50 states, according
to the CDFI Coalition. They range from local credit unions to
community loan funds and they perform a variety of roles from
providing venture capital to funding affordable housing.

What’s compelling about CDFIs is that they can combine
innovative social missions with service to low-income
communities. They are community partners that provide financing
for projects that have social value or may be neglected by
larger institutions. They can target underserved neighborhoods
and even develop sub-specialties such as sustainable development
and green businesses that have environmental missions.

Wealth effect will drive retail stocks

Nov 19, 2012 20:13 UTC

CHICAGO (Reuters) – This holiday season may prove to be a bell-ringer for stores and producers of consumer goods and services, despite disappointing recent retail sales reports.

The 0.3 percent drop in October sales the Commerce Department reported after a three-month increase was likely due to the impact of Superstorm Sandy. Sales should pick up in coming months. In fact, there are enough positive converging trends that stocks in this sector — especially for retailers and manufacturers of consumer durable and discretionary goods — will rise well into next year.

A continued economic recovery will amplify retail spending in 2013 — what economists call a multiplier effect. Increased discretionary spending flows throughout the economy, creating even more jobs and buying more goods and services.

Picking satellites to revolve around your core

Nov 16, 2012 14:38 UTC

CHICAGO, Nov 16 (Reuters) – The “core and satellite”
strategy for portfolio management is an elegant and simple
approach that will not only help you diversify but allow you to
reduce your country and political risk.

Your core consists of broad indexes of stocks and bonds with
exchange-traded funds like the Vanguard Total World Stock Index
ETF and the Schwab U.S. Aggregate Bond ETF.

Then you can have some fun by working on satellite holdings
that include emerging markets, specialized themes and dividend
payers. These are more specialized investments that focus on
long-term global growth and help distance you from increasing
volatility and the slow-growth economies of the U.S. and Europe.

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