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During the program, the Oracle of Omaha recommended that the average investor buy an index fund and lock it away for a few years.
The think behind this is that most active investors, or those who try to beat the market, usually end up underperforming the market.
You see, Buffett employs at least two people — Todd Combs and Ted Weschler — who actively manage tons of money for Berkshire Hathaway.
And while Buffett reports that they outperformed the markets last year, surely he can't expect them to outperform forever. Right?
From this morning's Cashin's Comments:
Do As I Say…. – Becky Quick had another top of the game interview with Warren Buffett on Squawkbox yesterday. While it normally doesn't require water-boarding to get the Oracle of Omaha to talk, Becky, as a consummate professional, consistently and charmingly draws out follow-up on key topics, helping the viewer better understand the points being made. It was a terrific, information-filled three hours.
It was not fully consistent, however. At one point Warren suggested that the public might be well-served to buy an ETF index fund product, put it in a drawer and pretend the market was closed for the next five years or so. The theory being that the inevitable improvement in the U.S. economy would lift stocks and, thus, the value of your ETF.
In the same interview, Mr. Buffett allowed as how he was going to give two in-house money managers about 25% more money to manage (about a billion dollars or so). The reason being that they had outperformed the S&P by a very handy margin.
The man on the street should invest by buying unmanaged index funds, while America's most successful investor hands gobs of money to two active and savvy managers. As they say on Sesame Street – "one of these things is not like the other."