Hey there TSP investors!
Guess what? It’s that exciting time of the year when Warren Buffett drops his annual shareholder letter. This tradition has been a goldmine of investing wisdom over the years – nuggets we can use to up our investment game and build wealth in our TSP.
Sure, many folks are going dive into the letter, trying to crack the code on which stocks to snag or ditch or when they should buy or sell. But honestly, that’s a bit of a wild goose chase.
We’re taking a different route – setting our sights on the good stuff. I’m talking about the lessons, the philosophies, and the mindset shifts that can seriously level up our investing knowledge.
So, here’s the game plan: I’ve snagged a few quotes from this year’s letter that relate to solid investing principles. It’s like getting reinforcement straight from the guru himself, Warren Buffett.
Lesson 1: Less is More
One fact of financial life should never be forgotten. Wall Street – to use the term in its figurative sense – would like its customers to make money, but what truly causes its denizens’ juices to flow is feverish activity. At such times, whatever foolishness can be marketed will be vigorously marketed – not by everyone but always by someone. (emphasis added)
Interesting quote here—activity is what drives profits, not growth.
Activity can be anything. Buy something, Sell something. Do something. But hold firm and stay the course? Not as much.
Thankfully for Wall Street, most investors already have a bias towards action, especially when the market drops. When an investor loses money, there is a feeling that something is wrong and we must do something, anything.
Even the Thrift Savings Plan (TSP) is not blameless here. While they restrict your trades into all of the L Funds and the C, S, I, and F Funds to two per month, you can do as many trades into the G Fund as you want. I think this just fuels bad investor behavior. I’ve shown in past articles that moving to the G Fund when the market drops is exactly what many TSP investors do.
Remember, less is more. Don’t trade. And don’t fly into the G Fund each time you get nervous.
Lesson 2: You don’t have to be perfect
Nevertheless, Charlie, in 1965, promptly advised me: “Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices.” (emphasis added)
There is a feeling in the investment world that you need to be perfect. Trust me, you don’t. You don’t have to buy the stock at the absolute lowest or purchase the next Nvidia, Amazon, or Apple. You don’t have to time the market perfectly, jumping into the C Fund, then back to the G, and back again.
Like Charlie Munger said to Warren Buffet, focus on owning wonderful companies and owning them for a long time whether you do this with individual stocks or an index fund like the C, S, or I Fund. Owning these companies for a long time will be the driver of returns, not perfecting the date/time you bought the stock or sold it.
Lesson 3: Ignore the noise
I can’t remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good. The Dow Jones Industrial Average fell below 100 on that fateful day in 1942 when I “pulled the trigger.” I was down about $5 by the time school was out. Soon, things turned around and now that index hovers around 38,000. America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one. (emphasis added)
This quote is priceless. Sit there, listen to no one. Wait.
Easier said than done. But it can be done.
The 24-hour news media delivers information to us instantly and constantly. Even if you turn off the news, the person in the office next to us brags about how he moved his TSP into the G Fund “just in time.” Also, instant access to your portfolio can tell you exactly how you are doing that day.
All things that make sitting quietly and listening harder than it looks.
Final thoughts
Buffett is like the investing guru everyone looks up to but hardly anyone tries to copy. We sometimes feel his lessons can’t apply because he isn’t the same as us. He is a billionaire after all.
But guess what? I think we can follow in his footsteps if we focus on his smarts rather than just copying his moves. After all, it was these “smarts” that got him to the billionaire status.
My aim in dropping these nuggets of wisdom is exactly that – to make us savvier, more level-headed investors for the long haul.
I hope these lessons hit the spot for you. And, you know the drill – stay on track! Your federal retirement will thank you!
Happy investing.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.
