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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 your 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 That Female Investors and Warren Buffett Share in Common
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 the book, 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.
Read More From Toughnickel
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.
The Marginal Interviews and Cutesy Writing Tend 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.
Why Warren Buffett Is Considered 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 fourth wealthiest person in the world as of 2020.
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.
How Do You Invest? (Stocks, Bonds, Mutual Funds, etc.)
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.
Be greedy when others are fearful, and fearful when others are greedy.
— Warren Buffet
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.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Shelly Sellers from Midwest U.S.A. on August 26, 2013:
I haven't seen this book about Warren Buffett before today! It looks like a great read.
anonymous on June 30, 2013:
Great lens about a great guy I've always admired. Sharing this via Pinterest and will look for other places in my networks to recycle this.
tivlu on June 28, 2013:
Interestingly Warren Buffett joined Twitter recently and his second tweet was about his new essay on why women are key to America's prosperity... Warren Buffett is bullish ... on women
Rose Jones on June 27, 2013:
Very enjoyable, Buffet is a king and a man who should be emulated. Bookmarked.
InfoCoop on March 03, 2013:
Buffett is a genius.
Tolovaj Publishing House from Ljubljana on February 26, 2013:
We are all different characters, so I don't think there is universal 'best investment', but in most cases, for people who are willing to take some risk (and every investment is somehow risky), best is to have one's own business and have as much control of the cash flow as possible.
redrossero lm on February 25, 2013:
I actually don't like investing in stocks. Too volatile for my liking.
anonymous on February 24, 2013:
I could use help in this department. Guess I've got too much masculine energy! As a women I've had the worst luck with investments - too aggressive apparently. I'll check this book out. Thanks!
ohcaroline on February 22, 2013:
I agree with the theory that women are better investors. My favorite book is by the Beardstown Ladies on investing.
AlleyCatLane on September 22, 2012:
Very interesting and well written article.
Lynda Makara from California on August 13, 2012:
This is a great review. I've noticed the different investment styles between men and women. Good to know that Warren Buffet invests like a girl. Angel blessings.
Itaya Lightbourne from Topeka, KS on August 07, 2012:
What a cute title for this book! Great review and pretty accurate. I worked for many years with different investment firms and the women were usually more conservative for sure. :)
orange3 lm on July 14, 2012:
Warren Buffett is the best when it comes to investment advice.
Peggy Hazelwood from Desert Southwest, U.S.A. on June 10, 2012:
Thanks for the advice on which portions of the book are worth reading. That's valuable for this type of book so you don't get bogged down in the crud. Warren sounds like such a smart guy.
anonymous on June 05, 2012:
I love this lens for promoting a book with a great thesis!
LisaDH on June 05, 2012:
I love the title of this book! I think Warren Buffett is a brilliant investor and we can all learn from him.
julieannbrady on May 29, 2012:
I hadn't heard of this book before, but it is quite a compelling argument that women are better at investing with money than men! Like it.
goldenrulecomics (author) from New Jersey on May 28, 2012:
@anonymous: and for a lot of us older ones as well!
anonymous on May 22, 2012:
Warren Buffett is an idol for all of new Investors.
Jethro from Philippines on May 21, 2012:
I'm still planning to invest in mutual funds someday. I save a part of my salary monthly and then will invest them if they are enough. Thanks for this lens. :)
GeekGirl1 on May 03, 2012:
This is a useful lens. Big help to those who have plans of investing.
Chazz from New York on February 07, 2012:
Well written and interesting lens. My savvy brothers-in-law are big Buffet fans and that has served them well. But they didn't have kids and college tuition, etc. I invested in my son and the returns are better than any I would have had investing otherwise.
anonymous on January 25, 2012:
Warren Buffet needs to run for president! Great lens, I enjoyed all the good info.
Barbara Walton from France on January 17, 2012:
I found this clear and easy to read. My husband is a Warren Buffet fan but I like houses - if all else fails, you can ive in them! Interesting to note, though, that after so many years of feminism, the joke behind this title is that to be told that you do something 'like a girl', is still a gross insult for a man - instead, it should be a massive compliment. Thanks for a great lens.
E L Seaton from Virginia on January 08, 2012:
Very helpful, keep up the good work.