“Never do what I do, but always do what I say”. Paradoxical lessons from Warren Buffett—taught over 65 years of market mastery.

Since 1965, Berkshire Hathaway has delivered an annual growth rate (CAGR) of 20%, compared to 10% from the S&P 500. Yet, the advice Buffett offers the average investor often contradicts his actions.

1. The most successful active investor recommends passive investing

Buffett has built his career and fortune as an active investor, but over the years, he has repeatedly extolled the benefits of investing in low-cost index-tracking funds with a broad spread of shareholdings.

In 2007, Warren Buffett made a $1 million bet that he could outperform hedge fund managers over the course of a decade by investing in an S&P 500 index fund. In 2017, he won by a landslide.

2. Buffett times the market brilliantly but urges you not to

Warren’s mantra:
"Be fearful when others are greedy, and greedy when others are fearful."

Warren and Charlie Munger sat on mountains of cash, waiting for rare, high-quality opportunities. They attribute their success to a dozen good decisions over 60 years - that's roughly one good decision every five years."

But for most investors, Buffett recommends the exact opposite: dollar-cost averaging i.e. investing a fixed amount into low-cost index funds regularly, regardless of market conditions.


3. Buffett uses Leverage but warns you against it

Berkshire leverages its capital by 60% by borrowing from insurance operations, significantly boosting its returns, but recommends the opposite.

Yet Buffett has long warned about the dangers of leverage.

About Long Term Capital Management that blew up due to leverage:

“To make money they didn’t have and didn’t need, they risked what they did have and did need. That is foolish. It doesn’t matter how smart you are—if you risk something important for something unimportant, it makes no sense.”

"If you're smart you don't need leverage; if you're dumb, it will ruin you."

"My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage," he said. "Now the truth is — the first two he just added because they started with L — it's leverage."

4. Buffett's Diet: Do not try this at home

Buffett famously eats McDonald’s for breakfast, steaks for lunch, drinks five Cokes a day, and indulges in cookies and ice cream.

“I've gotten to 94 with the habits of a 6-year-old. So far, it's working.
If somebody told me I would live an extra year if I ate nothing but broccoli and a few other things all my life, I would say, ‘Take that year off the end of my life and let me eat what I like to eat."


Final Thought
Don’t copy Buffett’s playbook—understand his principles and advice and tailor it to your temperament and circumstances.

Disclaimer: Views are personal and should not be considered investment advice.

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