I love the investor, Warren Buffett. Hate the politician, Warren Buffett, but love the investor.

I believe the Benjamin Graham based investment philosophy utilized by Buffett is excellent. An investment style worth emulating for individuals who invest in individual securities.

Identify solid companies in growing industries, with superior products or services, and run by first-rate management. Then invest for the longer term.

The results are evident both in the personal success of Warren Buffett and in his primary investment vehicle, Berkshire Hathaway.

But neither Benjamin Graham’s style nor Warren Buffet are infallible. Mistakes can be made. 

Warren Buffett’s Recent Mistakes

The Street’s “Warren Buffett Owns Up to Mistakes” article lists a few recent investment errors made by the “Oracle of Omaha”.

many are well aware of the investor’s past troubles with the airline industry. Although he has managed to successfully turn around NetJets in recent years, the staggering loss he was forced to write off from his bad bet on U.S. Airways remains a smudge on his record.

Energy is another industry the investor has struggled with in the past. While he has long maintained exposure to oil and gas companies, Warren Buffett famously doubled down in 2008 on ConocoPhillips just as oil prices were peaking. The bet quickly went sour as crude prices crumbled, leading to a more than $1 billion loss. In the years following this bad bet, the investor has dramatically pared back his stake in oil producers, most recently closing out his Exxon Mobil position entirely. He still maintains small exposure to ConocoPhillips.

In a section listing Berkshire’s lowlights over the past year, the investor noted that his company’s decision to spend $2 billion to purchase bond issues of Energy Futures Holding has proven to be a “big mistake.”

Perhaps the biggest error on Buffett’s part over the past year, however, has been his persistent optimism towards the housing market. In this year’s letter, the investor offered a mea culpa, noting that, while he expected the residential real estate market to claw back in a year or so, this forecast was “dead wrong.”

A fair number of strategic investing errors by one of the world’s premier investors.

What’s My Point?

Other than kicking around Warren Buffett?

The point is that no one ever gets it right all the time.

Even the Best Investors Err

Warren Buffett has been a great investor over the long run. But even he and his top-notch advisors sometimes get it wrong.

Investing in individual investments and/or trying to time market movements is not easy. Unless you have significant investing experience it is usually better to stick to a passive investment approach.

And, as I constantly point out, even professional money managers tend not to outperform their market benchmarks consistently and over the long-term. There are a variety of reasons for this in addition to poor decision-making.

Do Not Blindly Follow Any Expert

Warren Buffett has an excellent track record. But he, and all investment experts, are not perfect. If you blindly copy an expert’s investment strategy, you will end up with some dogs.

And today’s hot investment advisor may lose his or her sizzle next year.

Never invest an excessive amount of your assets on any tip. Regardless the source.

Emulating Warren Buffett

I agree with the Benjamin Graham investment strategy used by Warren Buffett.

It is a traditional value investing approach slightly more complex than I described above. If you want to learn more about this investment philosophy, I highly recommend reading Benjamin Graham’s “The Intelligent Investor”.

If you invest in individual equities, value investing for the long run is a good strategy. But it takes technical skill and experience to properly analyze available investments. Not always an easy route.

Some investors take a short-cut and simply try to emulate Warren Buffett.

The easiest way to is invest directly in shares of Berkshire Hathaway. The B class shares are priced at a level where the average investor can buy shares. The A class shares are probably beyond most investors ability to buy even one share.

The upside is that you will own shares directly in Berkshire Hathaway. That means participation in the public, private, and operating companies which are part of Berkshire. The downside is that you may pay a “Buffett premium” on the shares. And when he steps down or dies, there may be a price (over)correction to reflect the loss of Buffett’s investment expertise.

There are also funds that replicate investments made by Warren Buffett and Berkshire Hathaway. Or you can follow Buffett in media – insider trading reports, public disclosures in regulatory filings, news releases, Berkshire Hathaway annual reports, etc. – and mirror Buffett’s acquisitions and divestments on your own.

But there are potential problems with these latter approaches. It is not easy to invest exactly like Warren Buffett and match the performance of Berkshire Hathaway.

Feel free to follow Warren Buffett or any other investment expert. Just remember that it may not be a continuous stream of positive returns. Understand the potential limitations and it will aid in your long-term success.

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