During his multi-decade career, Warren Buffet has captured the minds of followers through an interesting mix of wildly successful investments and down-home, folksy charm.
In the absence of self-penned autobiographies or memoirs, authors have spent countless hours attempting to uncover the characteristics which make the Omaha native so successful in business.
In examining Buffett’s Berkshire Hathaway(BRK.A) empire three notable qualities come to mind which, when internalized, can help an investor benefit in times of economic prosperity and protect in the event that the markets turn south.
Long Term Focus
Famously, Warren Buffett has said that his favourite holding period for an investment is forever. Living up to his words, a number of his positions have been mainstays in the Berkshire Hathaway portfolio for years and even decades.
In an interview following his landmark decision to acquire the remaining shares of Burlington Northern Santa Fe Railroad, Buffett turned his attention to the long term, forecasting that railroads will still be essential 100 years from now.
By focusing on the long term, this world famous investor has been able to weather a number of economic crises, including the most recent economic meltdown. At the height of the crisis, while many were fleeing the markets, Buffett penned a now-famous opinion piece in the New York Times titled, “Buy American. I Am.”
In the article, he insisted that, contrary to the beliefs of many, the turmoil provided an ideal opportunity to take advantage of the U.S.’ inevitable recovery.
Although hurdles facing the U.S. and abroad are sure to crop up in 2011 and stoke investor fears, I remain confident that we are on the road to recovery. By taking a long term view it is possible to profit from improving conditions and avoid the psychological barriers that can lead to detrimental, knee-jerk reactions.
Through his investments and subsidiaries, Buffett has expanded his reach into numerous corners of the global marketplace. By tapping into sectors including health care, industry, finance and consumer goods, the Berkshire Hathaway empire has been able to weather market turmoil and profit in times of strength.
Thanks to the advent of ETFs, investors can now easily expand their reach beyond domestic stocks and bonds and into foreign nations and alternative asset classes such as commodities and currencies. A comfortable balance of these components can help shape a portfolio and prepare for any market condition.
Berkshire Hathaway pays no dividend. However, yield-bearing companies still represent a major chunk of Buffett’s portfolio. Aside from being leaders in their respective fields, Buffett positions including Coca-Cola(KO), Proctor & Gamble(PG) and Johnson & Johnson(JNJ) are also notable dividend payers.
As we saw last year, distributions have become essential to navigating today’s volatile economic climate. The constant reminders of economic turmoil facing both the U.S. and abroad can lead to unexpected shake ups and gut wrenching dips.
Consistent dividends can help alleviate some of this volatility, providing conservative investors with some comfort and confidence.
One way investors can capture a diverse basket of strong, yield-bearing companies is through an ETF such as the iShares Dow Jones Select Dividend Index Fund(DVY).
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