Warren Buffett's Surprising Investing Advice

• (0:20) - Berkshire Hathaway (NYSE:BRKa) Annual Meeting
• (2:25) - Buffutt's 3 Key Investing Tips
• (10:55) - Warren Buffett's Career Advice
• (12:50) - Episode Roundup: Podcast@Zacks.com

Welcome to Episode #41 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.

Instead of looking into the value traps, Tracey decided to cover what went on at Berkshire Hathaway’s annual meeting which just happened in Omaha because it’s the Super Bowl for value investors.

It’s the biggest event of the year.

Warren Buffett, who is now 86, and Charlie Munger, aged 93, opined on stage for hours and took numerous questions from the audience.

What did value investors learn from the Oracle (NYSE:ORCL) of Omaha this year? Some of it was surprising.

Buffett’s Surprising Investing Advice

1. It’s Okay to Buy Growth

Buffett admitted he made a “mistake” in not buying Alphabet (NASDAQ:GOOGL) and that he underestimated Amazon’s Jeff Bezos. Alphabet is the type of company Buffett would normally love to invest in. It has a global brand and a big moat in its advertising business. Additionally, the free cash flow is to die for.

Buffett has only tentatively dipped his toe into the tech growth names. He recently bought into Apple (AAPL) and it’s now one of his largest holdings.

And no one is advocating that you suddenly buy growth stocks with crazy high valuations. But over the years, companies like Alphabet have had attractive valuations, even for the value investor.

It pays to keep your mind open to growth.

2. Don’t Be Afraid to Sell

While Buffett has famously said the best time to sell is never and also has been known to hold some of his stocks for decades, he announced that he had sold a third of his IBM (IBM) shares.

He said he didn’t value IBM the same way now as he did 6 years ago.

It’s a good lesson for investors. Sometimes the investment doesn’t work out. It doesn’t mean you should stay in it.

3. Buy Index Funds

In response to a question about what his wife should buy once he has died, Buffett once again said that she should buy index funds.

What?

In 2014, he also said this in his annual letter to shareholders.

If you think about it, it makes sense. Not everyone can invest like Buffett. Nor do they want to try to do it. Index funds provide a large basket of stocks. If you want to own the small caps, there’s the Russell 2000 ETF (IWM). Or you can buy the S&P 500 Index (SPY (NYSE:SPY)).

There are also dozens of niche ETFs that can allow investors to buy only their favorite sectors.

For those who love stock investing, like Tracey, you don’t have to choose. You can buy some individual stocks as well as some indexes. Then you have the best of both worlds.

Career Advice for Millennials

Buffett and Munger also had some words for Millennials. They basically told them to find careers in something they love because they’re likely to be more successful that way.

Easier said than done, right?

But the same advice can be given about investing. Owning stocks should be fun. If it’s making you sick or nervous, you have to re-think your strategy.

Also, we tend to buy stocks in companies we love. Heck, even Warren Buffett does that. How else has Berkshire Hathaway acquired Dairy Queen, See’s Candy and shares in Coca-Cola?

What else should value investors know about Buffett and his investing advice?

Tune into this week’s podcast to find out.

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