Why Mirroring Warren Buffett’s Stock Portfolio Won’t Always Work
Coming up with the right investment strategies is a complicated and time-consuming process. As a result, it is no wonder that there are a lot of people who seek investment success by mirroring the investment portfolios of successful investors such as Warren Buffett. Unfortunately, there are some serious drawbacks to mirroring Buffett’s portfolio, meaning that interested individuals might want to reconsider before proceeding further.
Why This Isn’t a Path to Guaranteed Investment Success?
For starters, interested individuals can’t mirror Buffett’s investment portfolio with perfect precision. There are seasoned investors who work with investment platforms to make it possible for interested individuals to mirror their investment portfolios with perfect precision, but Buffett isn’t one of them. Instead, interested individuals will have to make use of a wide range of sources to approximate Buffett’s investment portfolio, thus resulting in something that won’t be anywhere near the real thing. Even worse, the best information on Buffett’s investment portfolio can be found in the reports submitted to the Securities and Exchange Commission on a regular basis, which are outdated by considerable spans of time. In other words, someone who wants to mirror Buffet’s investment portfolio as much as possible is just going to be reliant on incomplete information but also forced to sacrifice the flexibility that is one of the smart and sensible investor’s most useful tools.
Moving on, there are other serious issues with mirroring Buffett’s investment portfolio as well. For example, different people invest for different reasons, meaning that while Buffett has a proven record of success, his investment focus won’t be suitable for all of the other investors out there. Furthermore, even if their investment focuses are compatible at the start, there is no guarantee that this will remain true forever and ever, meaning that there will come a time when interested individuals will have to either stick with something that doesn’t suit them or changing their approach to something else altogether.
Under these circumstances, some people might be tempted to go for an actual mirror investing option. However, said individuals should know that particular option comes with both upsides and downsides as well, meaning that they shouldn’t let down their guard in that case either.
For instance, they will actually be able to engage in mirror investing when they choose a seasoned investor who has actually agreed to be mirrored by interested individuals. This has a huge upside in that it is low-effort, which makes it an excellent choice for people who don’t want to spend hours and hours pouring over relevant information on which to base their investment decisions. On top of this, it enables interested individuals to eliminate the role of emotion in investing. Something that can have a catastrophic impact on their investment portfolios when they make choices based on emotion rather than number-backed reason.
Unfortunately, actual mirror investing has some serious issues as well. One excellent example can be seen in how the practice is relatively new, meaning that there isn’t a great deal of historical evidence that can be used to evaluate potential options. Another excellent example can be found in the fact that most people are not capable of securing consistent success when it comes to investing, meaning that interested individuals can expect both successes and losses who they follow this particular investment approach. There are some investors such as Buffett who can manage a measure of consistency that most investors can’t even dream of, but speaking bluntly, they are very much the exceptions that prove the rule. As a result, someone who chooses to mirror invest should be aware of the fact that they could wind up choosing to mirror someone who isn’t as good or isn’t as lucky an investor as they might hope for.
Summed up, people should definitely listen to Buffet when he chooses to speak out about investments. After all, he has earned his reputation in the field of investing for excellent reasons, meaning that he is a source of very useful advice. However, attempting to mirror Buffett’s investment portfolio might not be the best idea, not least because it isn’t actually perfectly doable under present circumstances. As such, it should be seen as one potential investment strategy rather than a magical shortcut to investment success.