Buffett’s lessons for individual investors

From Dr. Richard Smith, Founder, TradeStops:

Last year, we wrote about comments made by Warren Buffett that individual investors can have distinct advantages over large institutional investors. Here’s what Buffett said:

“The highest rates of return I’ve ever achieved were in the 1950s… I think I could make you 50% a year on a million. No, I know I could… I guarantee that.”

In this year’s letter, he listed the worst four periods for Berkshire Hathaway (BRK.A) stock.

Period   High   Low   % Decrease  March 1973-January 1975 93 38 -59.1% 10/2/1987-10/27/1987 4,250 2,675 -37.1% 6/19/1998-3/10/2000 80,900 41,300 -48.9% 9/19/2008-3/5/2009 147,000 72,400 -50.7%

Buffett cautions that:

“In the next 53 years our shares (and others) will experience declines resembling those in the table.”

Although Warren Buffett predicts significant declines, he can’t just go to cash. If he told the investing world that he was going to cash, it would probably



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