Warren Buffett Invests Like a Girl: A Great Guide for Investors
Warren Buffett's Eight Principles Every Investor Needs to Know, According to Motley Fool
Billionaire Warren Buffett and the women of the world have one thing in common: They are better investors than the average man. That's what the jacket copy of the book Warren Buffett Invests Like a Girl says, and author Louann Lofton does a yeoman's job trying to prove that thesis.
This book does a good job in laying out a range of principles that you should use to guide your investments. Tying the guidance to Warren Buffett catches the eye, but really this is a good book for anybody who wants to learn to invest with discipline and purpose.
What Buffett and Female Investors Have in Common
The Key is Temperament
Author Louann Lofton spends the first quarter of the book setting up the premise that Warren Buffett invests the way female investors do. She explains that studies have shown that women tend to approach investing with a calmer and healthier attitude, which enables them to avoid taking the risks and losses that most male investors suffer.
In one survey of 35,000 brokerage accounts, it was shown that men traded their stocks 45 times more than women did, exhibiting an overconfidence in their ability to pick winners from losers. And with all those extra transactions came extra trading costs, dragging their returns down more than women's.
Lofton does a good job keeping the statistics readable and flowing, setting up the comparison to Buffett very well in this section of the book. She says Buffett's calm temperament is what he has in common with women, and then moves onto explaining how that temperament manifests itself in eight characteristics of female investors.
Eight Traits of Female Investors - Warren Buffett Shares Them Too!
Author Louann Lofton identifies eight characteristics of female investors that she says also guides Warren Buffett. The book does a great job in expanding on each of the characteristics, how Buffett exemplifies them, and how you can benefit by following them as well.
- Women tend to trade less than men
- Women exhibit less overconfidence
- Women shun risk more
- Women are more realistic
- Women tend to research more
- Women are more immune to peer pressure
- Women learn from their mistakes
- Women are less willing to take extreme risks
Patience Is a Virtue
Buffett is the Ultimate Long-Term Buyer
All these characteristics that Warren Buffett Invests Like a Girl highlights results in one main strategy: Buy and hold. Buffett has famously said his favorite holding period is ''forever'' and that many times he has been better off by sitting on the sidelines waiting for the right opportunity.
The book does a great job in explaining why it is best that you follow a similar approach to investing: Research, find a stock you believe in strongly enough to hold it forever and buy it at a fair price.
It sounds simple, doesn't it?
Dividends and Stock Splits
Buffett Dislikes Both
For most of Warren Buffett Invests Like a Girl, author Louann Lofton applies the eight female characteristics to Buffett's record and showing how he has benefited. The examples she uses are strong and very instructive, and I think they will help most readers.
One of the key characteristics deals with ignoring peer pressure, and she points out Buffett's criticism of two actions that Wall Street loves: paying dividends and stock splits.
Dividends have been getting a lot of attention lately, with many financial pundits saying dividend-paying stocks are more attractive now. But hold on, Buffett says. Allocating capital in the most efficient and productive way is what a company should focus on, and if the best thing a company can think to do is return the cash to investors that's not saying much for management. So Buffett doesn't place a high premium on dividends at all.
As for stock splits, he just considers them pointless and a waste of time, money and energy. I agree.
Marginal Interviews and....
Cutesy Writing Tends To Wear Thin
Louann Lofton makes her arguments and illustrates her points over 170 pages, ending with a section she calls Foolish Investing Principles. The section is very straightforward, clear and to the point -- a really nice summary of what the book is about a plan of action for every reader. That section alone makes the book worth the purchase.
Do yourself a favor if you buy the book: Skip the 60 pages of interviews that are in the appendices. The interviews, with five professional investors, ramble and offer very little of value. They seem to have been included verbatim, so there are extraneous paragraphs that won't help you invest at all (One investor mentions a type of life insurance product called a viatical, and she asks what they are. The exchange goes on for half a page and is totally irrelevant).
The only other thing I didn't like about the book is something that the Motley Fool is known for. She includes several asides in the writing that are meant to be cute or humorous. Some are hits but most just fall flat. For instance, when she's writing about getting scuttlebutt on a company that you are interested in, she mentions that the word is also the name of a ''gentleman's club'' in Slidell, Louisiana. Who cares?
But when she takes on academics who argue that Buffett is simply a fluke, that it's too hard to beat the market, the humorous style works well.
Warren Buffett's Profile - The World's Greatest Investor
Most Americans probably have heard the name Warren Buffett. He is probably also well-known outside the United States, although for most of his career he shunned overseas investments. I assume anybody reading this article would at least be familiar with him.
But for those who don't know who Buffett is, or just want more details, here is the introduction to his profile on Wikipedia, with a link to the page:
Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman, and CEO of Berkshire Hathaway. He is consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and is the third wealthiest person in the world as of 2011.
Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1
Warren Buffett vs. Motley Fool - Which Side Are You On?
Warren Buffett has become a billionaire through investing, and he says it is better to concentrate on just a few stocks of companies that you know a lot about and believe in totally.
Motley Fool says that's, well, foolish. Diversification, which author Louann Lofton suggests is 15 to 20 stocks, is better because it reduces the risk that one bad apple will spoil the whole bunch.
Because I tend to stick to mutual funds only (and index funds at that!) I don't really have a strong opinion on this issue. Though a part of me does think that a guy who's made billions through investing might know what he's talking about.
What Do You Think of Diversification?
How Do You Invest? - Stocks, Bonds, Mutual Funds...
Most of the investing in my family is done through our retirement accounts at work (401Ks) or on our own (IRAs). We long ago decided we really didn't have the time, energy or inclination to pick stocks, so most of our money is in mutual funds. And anyway, my company strongly encourages its employees to only invest in mutual funds because of conflict-of-interest appearances.
Do You Invest in Individual Stocks and Bonds?
Be Greedy When Others Are Fearful, and Fearful When Others Are Greedy
More Advice from Buffett
I hope this review has helped you decide whether to buy Warren Buffett Invests Like a Girl. I think the book is certainly worthwhile if you are learning how to invest.
I also hope this article has sparked you to reflect on how you invest, or whether you should invest at all. Please share your thoughts on investing, the book, this article or anything else you think appropriate.
Thanks for visiting.