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Traders' Obsession with Warren Buffett and Why It Could be Unhealthy

Posted May 21, 2013 by Edralyn to Financial Advice 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

Google Warren Buffet and you'll find a gaggle of blogs: 'trade like Warren Buffet.'  Or, 'Invest like Warren Buffet.' No one's going to argue that Warren Buffett is not a skilled and successful trader, and the blogs are right to pay attention to his tactics. But the oversimplification of his moves could be more detrimental than helpful to less experienced traders. Telling a trader to make decisions based on simplistic statements such as, 'Buffet likes banks' or 'Buffet likes railroads' or 'Buffet's not into gold' is useless if that's where the advice ends. Not only is the Buffet-centered advice overly simplistic, but it also ignores a very basic and important fact: you probably don't have the resources available to you to allow you to trade like Warren Buffet.

Before you stop reading this because your dreams of climbing the trader ladder to Buffet-like stature have been dashed, consider how detrimental it would be to approach your trading career based on generic tips and pipe dreams about being able to trade like a man who has a lot of money at his disposal and a natural talent for spotting good investments. 

Why Buffet's Trading Style Works


To deny it. He does all the right things. He buys strong companies when the economy is floundering and then he keeps those companies forever. Buffet has enough money that he can take advantage of the most important part of trading: timing. Buffet's timing is impeccable, and that is the mark of a great trader.


What You SHOULD Learn from Buffet

Buffet's advice is helpful. He's a great example of not allowing the market to control his decisions. He looks at what's happening in an economy, but he doesn't follow the trends of other traders. "The only way an investor can get killed is by high fees or trying to outsmart the market," Buffet wisely advises.</p>

Why You Probably Won't Be Able to Trade Like Buffet

Research shows that individual traders have a rough time getting the timing right the way that Buffet does. Individuals can have a hard time succeeding alone. If you don't have the resources that Buffet has or the uncanny insight into the world at large, you may consider index funds as a smarter way of trading. "If individuals aren't going to be an active investor -- and few should try to that --," according to Fortune writer Carol Loomis," then they should just stay with index funds…And they should buy it over time. They're not going to pick the right place and time."

Don't be discouraged by Loomis' suggestions. You can still look up to Warren Buffet as one of the most savvy traders out there, but just make sure that you are trying to implement his achievable skills rather than hoping for the money and insight that not every trader can have.



About Edralyn: Writer Karl Meyers blogs for  tradingacademy.com  that offers education on trading stocks.  

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