Invest like Warren Buffett
February 1, 2019
We at Versatile Capital believe that a simple approach to investment management is usually best and had an engagement with a prospective client recently that highlighted this for us. This individual, who already has substantial wealth, told us that he wanted to be “as wealthy as Warren Buffett”. He said this implying that our approach might not be the most direct path to that goal. On the contrary, the approach that we take here at Versatile emulates much of what Buffett has done to accumulate his substantial wealth.
What have been the keys to Buffett’s success? There are really three ingredients that, when executed properly and allowed to work together over time, have led to Buffett’s substantial wealth. First, Buffett is an avowed value investor, buying quality companies in solid industries at good valuations. Second, Berkshire Hathaway has been an incredibly tax-efficient vehicle for holding public and private companies, facilitating a compounding of his wealth at a lower effective tax rate. Third, Buffett has been viewed as an incredibly patient and disciplined investor, not acting on emotion, buying only at attractive valuations and never overpaying for potential growth.
So, you would ask how Versatile can emulate this approach? Very simply, by using the same three ingredients. First, our Factor-based philosophy not only consistently keeps portfolios in the best value and highest quality companies but also avoids market cap-weighted exposure to the most expensive stocks. This is all done using rules-based indices that capture value and quality, among other proven Factors. Second, our exclusive use of ETFs to execute our philosophy is the most tax-efficient way possible to own public equities. Furthermore, the breadth of ETF offerings facilitates effective tax-loss management when possible. Third, our philosophy requires patience and discipline, and attempts to limit the human behavior and potential errors that can trip up so many investors’ plans.
This may sound like an oversimplification, but we at Versatile believe that simpler is better and our approach has the data to support our view. By following these basic principles and utilizing our low-cost approach, a healthy allocation to public equities (and for some a fixed income allocation) sets you up for the potential of significant wealth creation over the long term.
Let us show you why we believe our approach is the best one for investment success.
We look forward to a conversation.