Don't Dwell on Investment Mistakes; Move on, Like Buffett
Founder and Chairman of the DWM Investment Committee at Destination Wealth Management.
Where have all the skeptics and cynics gone? Those that said Warren Buffett had no idea what he was doing and this investing legend had lost his touch. They seem rather quiet now.
The humility to admit a mistake is often looked at as an indictment of one's judgment; nothing could be further from the truth. As an investor you will make mistakes. But understanding those mistakes is key to becoming a better allocator of capital.
Warren Buffett readily admits he bought Conoco at the wrong time and invested in Irish banks that blew up. But he gets on with it, and has been very tactical and active in the past two years. And you need to look forward as well; money is not made wallowing in past mistakes.
With the beta rally in stocks running out of gas, you will see a focus on investing in companies with quality earnings as investors plough into cash flow and dividend oriented positions.
Companies like Johnson & Johnson and Procter and Gamble Company are going to do well even in tough economic environments. Strong cash flow is exactly why Berkshire Hathaway bought Burlington Northern . Seek companies that will generate cash.
Being tactical means looking for opportunities around the globe. Warren Buffett recently invested in an alternative energy company, BYD , a Chinese battery maker company. The naysayers will say it's a small part of revenue at this point but so was Coca-Cola many years ago as well.
What else can you do as an investor?
Be a lender like Buffet. Berkshire Hathaway operated as a bank to General Electric , Harley Davidson , and Goldman Sachs . While you may not have billions at your disposal to lend individual companies, you can invest in corporate fixed income assets that are still underpriced relative to the treasury bubble. There is opportunity there for the taking.
In the disposable world of opinions, the dogmatic will scream that their view is solely right. They are willing to dismiss Buffet's 40 years of investment experience in the pursuit of a dramatic headline. Read the warnings and criticisms and digest the lessons but don't believe the conclusions. Warren Buffett isn't perfect but he is right about how to invest. And when he stumbles he moves forward.
Are you still dwelling on some of the mistakes you have made? It's time to move forward.
Editor's Note: Disclosure - Yoshikami does not personally own any of the above recommended stocks.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top investment 100 advisors in the United States for 2009 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at firstname.lastname@example.org.