Gary Silverman, CFP®

Each year, Warren Buffett's letter to Berkshire Hathaway shareholders is considered a must-read in the investment world. If you'd like to read the latest one (2013) you can find it here.

I think it is a great read. Though most of it has to do with what's going on in the company he heads, if you turn to pages 17-19, you'll get his "...Thoughts About Investing." This year's thought centers around the lessons we can all learn from some non-stock real estate investments he made years ago. It is a lesson about cautions when buying an investment, how being an "expert" is not a requisite to investing wisely, and the importance of taking the long forward-looking view to the point of virtually ignoring what's going on in the markets at the moment.

While I highly recommend reading "Thoughts,"  I also don't shy away from suggesting you read through to page 20; because at the end of the subsection he gives specific investment advice that most would do well to heed: Put 10% of your money in cash and the other 90% in an S&P 500 Index Fund.

Whoa! Are you talking yourself out of a job, Gary? Nope. First, let's realize that Warren isn't exactly selling all his holdings and putting 10% in cash and 90% in an index fund. He knows that with cautious wisdom one can generate returns that do better than that. After all, that's what he gets paid to do. Rather, he is trying to guard against generations beyond him and his abilities from being sold a bill of goods from my industry--promising the world but only delivering high-fee investment vehicles. My industry is very good at doing that.

The other part of the equation you might be missing is that such a portfolio would have plummeted to about half its value in the period from October 2007 though March of 2009 (which really echoed a similar drop from 2000 - 2002 and other times in history). He knows that this is not a big deal if you stick to your guns, do not panic, and eventually ride the market back up again. He can stomach that sort of volatility. I can stomach that sort of volatility. Most people panic and sell. 

That's where I come in, both in designing a portfolio that doesn't drop in half in the bad years while doing reasonably well in good ones, and holding the hands of clients to get them through the ordeal.

So while we can learn a lot from the wisdom and truth extolled by Mr. Buffett, I do not fear for my livelihood.