What would Warren tell you?

John Osbon - December 10, 2014

If you sent a letter to Warren Buffett asking for some investment advice, what do you think you’d get in the return mail? A board member of the San Francisco employee pension fund found out. What exactly did Mr. Buffett’s handwritten note say?

The $20 billion pension fund had been considering an investment in hedge funds. The board member described the fund’s financial situation and goals, and asked for advice. Mr. Buffett’s scribbly but crystal clear reply: I would not go into hedge funds – would prefer index funds.”

Indexing is good enough for Mrs. BuffettBuffett-1
We’re not surprised by this answer. He’s described the advantages of index investing in his annual letter to Berkshire Hathaway shareholders. He’s offered the same advice on CNBC many times. He’s even publicly stated that upon his death his wife’s inheritance should go into low cost index funds. And now he’s promoting the same idea for a huge pension fund.

I think he’d offer you the same advice.

I applaud the board member for asking the question in the first place. When giant institutions, with access to any investment on earth, start questioning the suitability of high fee, opaque investments like hedge funds, it’s a good cue for individuals to do the same. (See how hedge fund investments are shrinking.)

I encourage all investors to ask the same kind of question — “What’s the right investment for me?” It’s really the only question that matters.

John Osbon josbon@osboncapital.com

Print Friendly, PDF & Email


  • This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
  • “Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
  • Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
  • Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
  • This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
  • While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
  • Adviser does not endorse the statements, services or performance of any third-party vendor.
  • Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.