Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Monday, 16 March 2015

Key Points of Warren Buffett 2014 Letter to Shareholders

21:44 Posted by cheez , No comments

We understand that a lot of our readers do not have the time to read through the whole annual letter by Warren Buffett, the best investor of all time.
As such, we have summarized the key points of his annual letter below for the benefit of our readers! :D
We have only summarised points that we think are important for the average investors.
As majority of the annual letter relates to Berkshire Hathaway specifically, we were able to eliminate a huge part of the letter to the below 7points.
Do read and learn from the Sage of Omaha!

1) Berkshire Hathaway will now not only compare growth in its book value against price growth of S&P500 but also compare Berkshire's market value increase against the S&P 500 price increase.

2) Definition of Investing: "the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power - after taxes have been paid on nominal gains - in the future."

3) "...it has been far safer to invest in a diversified collection of American businesses than to invest in securities - Treasuries, for example - whose values have been tied to American currency (has fallen by 87% from 1964-2014)."

4) For majority of the investors, "a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities (treasuries, etc)." This is the best strategy for investors with long-term goals like retirement, with no need to rely on the money for short-term needs.

5) Investors should not fear price volatility. Volatility is dangerous if investors are investing for short-term purposes. However, over the long term, volatility has always been working in the investors' favour.

6) Ways to destroy long-term investors' portfolio:
       a) active trading
       b) attempting to "time" the market
       c) inadequate diversification
       d) paying huge fees to fund managers & brokers
       e) use of leverage

7)"Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent." Always keep sufficient cash reserves for raining days - individual or business.

For a full version of the letter, please click on the link below:
http://berkshirehathaway.com/letters/2014ltr.pdf

For more on Warren Buffett letters, see below:


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