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Applying Buffett's Wisdom in ETF Investing

Stocks in this article: BRK.A GS FAS VXX DVY IAU

NEW YORK ( TheStreet) -- Although Warren Buffett has never officially sat down to pen an official autobiography, droves of the Nebraska native's fans and followers already know and take the investor's pearls of wisdom to heart in their own investing endeavors. Although Buffett's success has largely resulted from his skills as a stock investor, ETF investors can still use his lessons to their advantage.

When it comes to planning an investing strategy, Warren Buffett is famous for his interest in "boring" industries. Rather than diving into the latest fast-moving tech company or trying his luck with other risky firms and financial products, the Berkshire Hathaway (BRK.A) chairman has opted to invest in firms that boast easy-to-understand business plans.

This strategy proved particularly beneficial when, at the start of the new millennium, the investor was able to avoid getting caught up in frenzy that ultimately led to the bursting of the dot-com bubble.

Long-term ETF investors can benefit from taking Buffett's preference for "boring" to heart when constructing their own portfolios. As the universe of exchange traded products has expanded, we have seen the emergence of increasingly complex instruments.

While it may be tempting to take advantage of products designed to track unique benchmarks or provide leveraged and inverse exposure to popular indices, as we have witnessed over the years, oftentimes these products leave investors open to excessive amounts of risk.

Products like the iPath S&P 500 VIX Short Term Futures ETN (VXX) and the Direxion Financial Bull 3X Shares (FAX) can be exciting to watch from day to day. However, these funds should only be utilized by aggressive and experienced short-term traders.

Although the investing public has expressed doubts in regard to some of the companies on which Buffett has opted to place his bets in recent years, the investor does not typically share these concerns. This is largely due to the fact that Buffett focuses his attention on investments that he considers to be sure things.

Whether it is going all in with Burlington Northern Santa Fe Railroad, or saving Goldman Sachs (GS) during the financial crisis, Warren Buffett is confident that profits will result from his deals.

>>View Warren Buffett's Portfolio

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