This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

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 - Get Report) 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 - Get Report) during the financial crisis, Warren Buffett is confident that profits will result from his deals.

>>View Warren Buffett's Portfolio

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs