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Invest Like Warren Buffett... But Not Really





If you want people to read your investing-related post or book, you'll increase your chances by mentioning Warren Buffett in your title. After all, I just did it - and it might be why you chose to read this. Every financial media company does it, including us at The Motley Fool.

His investing skills while the chairman and CEO of Berkshire Hathaway have made him the fourth-richest man in the world. Most of the articles and books about him attempt to dissect his investing strategies and explain how you can use them to identify your own winning stocks. So it was a bit surprising when Larry Swedroe wrote Think, Act, and Invest Like Warren Buffett. He's the director of research for the BAM Alliance of independent financial advisers, the author of several books, and a blogger on CBS Marketwatch. He also thinks that picking individual stocks - as opposed to investing in index funds - is a really bad idea.

I've chatted several times with Larry over the years, because he's as smart as they come on the topics of asset allocation and financial planning. Recently, we had a conversation about why he would write a book singing the praises of the world's most famous stock picker. Of course, that whole “increase sales by including Buffett in your headline” thing probably had something to do with it. But it's not just a gimmick; Larry has three main arguments for why the index investor should still listen to the Oracle of Omaha, and he uses actual quotes from Buffett to back them up. And it starts with…

1. Warren Buffett recommends index funds

It may not be widely known, but Buffett is actually a fan of index funds. Here's what he wrote in his 1996 annual letter:

“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expense) delivered by the great majority of investment professionals. Seriously, costs matter.”

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