Tags: Buffett | Bogle | index | investing

MarketWatch's Jaffe: Why Some Investors Ignore Buffett, Bogle on Index Investing

By    |   Tuesday, 28 April 2015 06:00 AM

It's hard to argue with the investing success of Warren Buffett and John Bogle, but MarketWatch columnist Chuck Jaffe cites several reasons why some investors don't follow their advice when it comes to investing in index funds.
  • "I can't stomach the ride," he writes. "As much as Buffett and Bogle believe indexing is for everyone, the truth is that the strategy makes many people nauseous. . . . Index funds don't work if you can't stick with them for the long haul, and if you don't have that kind of iron stomach, you don't belong on the ride.
  • "I can't afford a loss. This is about your timing. Buffett isn't promising that index funds will grow forever, without setbacks. He's suggesting they are an ideal long-term vehicle. If your time horizon is short and you need to control downside risk because you don't have time to recover, an index fund may not be appropriate," Jaffe notes.
"If this is your reasoning for not keeping with a simple, index-based strategy — and if your results have been less than satisfactory — maybe it's time to simplify your life and invest the way Buffett would have you do things."

Meanwhile, Bill Spetrino, editor of the Newsmax newsletter "The Dividend Machine," tells Newsmax TV that his strategy comes from the Warren Buffett school of investing.

"I started studying Warren Buffett, and he said to be greedy when others are fearful and fearful if others are greedy," Spetrino tells the network's "MidPoint" program.

"When the conventional wisdom tells you to buy a stock, I sell it. When someone doesn't like a stock, I'm in there buying."

Patience is a virtue in investing, Spetrino explains. "The journey of 1,000 miles starts with one step. If you want to get into good shape, it's going to take you 20 years to do it or 10 years to do it. You're not going to do something quicker than everyone."

Interestingly enough, Motley Fool writer John Maxfield says that while the legendary Buffett occupies a place front and center in the public's consciousness now, that will eventually change.

"How will historians write about Warren Buffett 100 years from now? Will they treat him like the magnificent Commodore Cornelius Vanderbilt? Or will the 84-year-old multibillionaire play a more muted role in history books, akin to the venerated Gilded Age stock operator Henry Clews?" Maxfield asks.

"I believe it will be the latter."

Maxfield doesn't deny Buffett his due. "It would be silly to argue that Buffett isn't one of the most accomplished Americans alive today," he acknowledges.

"But unlike the great business moguls of America's past, Buffett didn't invent a product or process that will live on in perpetuity," Maxfield explains. Vanderbilt produced steamship lines.

And what of Buffett?

"His innovation consisted of using insurance float to fund a corporate conglomerate," Maxfield says. "Buffett's innovative use of float is difficult for the average person to grasp."

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It's hard to argue with the investing success of Warren Buffett and John Bogle, but MarketWatch columnist Chuck Jaffe cites several reasons why some investors don't follow their advice when it comes to investing in index funds.
Buffett, Bogle, index, investing
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2015-00-28
Tuesday, 28 April 2015 06:00 AM
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