Warren Buffett's best investing idea is by far the simplest to understand (via MitchellTuchman)
There are hundreds of great books on investing and untold websites and blogs. Many are worthwhile reads, many are not, and many are risky schemes, at best.
In the letter, Buffett makes a compelling case for what he calls “the American tailwind,” the simple idea that investors are not really buying companies when they invest, but an idea: that American prosperity — and the growth of its wealth — is driven by our dedication to the American idea. Our economic growth since 1942, the year of Buffett’s first-ever investment, has been “breathtaking,” he argues.
Surely, you might be thinking, someone out there, some sharp stock operator or person “in the know” did better. And you would be wrong.“If that hypothetical institution had paid only 1% of assets annually to investment managers and consultants, its gain would have been cut in half, to $2.65 billion. That’s what happens over 77 years when the 11.8% annual return actually achieved by the S&P 500 is recalculated at a 10.8% rate.
As Buffett elaborated on CNBC, owning a low-cost index fund of the whole stock market is the answer for the vast majority of long-term investors.
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