Warren Buffett Says Invest Like A Smarteys

Posted: May 08, 2012 12:01 AM

This morning on CNBC Warren Buffett dispensed with a lot of folksy wisdom. My politics are different than Warren’s but I agree with him on a lot of investing points. That’s why I love Smarteys.

One thing he is consistent about is that the average investor cannot day trade stocks. It’s a losers game. Over and over he has hammered that point. He is correct of course, you can’t. In Buffett’s case because he has such a big cash horde, he doesn’t buy stocks he buys companies.

If you notice the kinds of companies he buys, they throw off a lot of cash and are built for the long haul. The companies in his portfolio aren’t going to be going out of business anytime soon. For individual investors, it’s hard to replicate Buffett style investing. They don’t have the time, nor do many have the expertise. What should you do?

In 1962, Eugene Fama proposed the efficient market hypothesis. It’s time tested and proven. The individual investor cannot beat the market. Hence, just give up and buy the entire market. With mutual funds you can.

It makes life pretty boring from an investment perspective because you simply allocate a fixed amount of resources to be invested in specified time periods into a fund that has no fees and replicates the S+P 500.

No need to read the stock prices or worry about where the market is on a particular day. Using Fama’s theory simplifies your life and eliminates worry. You are only left with worrying about how to increase your income, not your assets. Over time, the market will take care of that.

SPY Chart

SPY data by YCharts

This is one of the reasons I love a new start up company called Smarteys. Because so many people don’t feel confident to budget for themselves, Smarteys gives you the power you need to accomplish that task. It takes the emotion out of it so you can pay your rent, pay your loans, make investments in your future and save for a vacation. All you have to worry about is making the money to put in your checking account.

Monthly budgeting can be the same as investing for the long haul. Smarteys gives you a framework. You choose how to allocate your cash. Once you make the choices, Smarteys helps you stay disciplined. You will stick to your plan and at the end of the day be better off than people that just focus on living paycheck to paycheck.