The 4-Part Warren Buffett Approach You Can Use to Find Good Investments
It's really hard to beat the market. So much so that 85% of actively-managed mutual finds underperformed the benchmark S&P 500 index in 2021. However, that's changing in 2022. When the broad market itself is down 20%, it's easier to beat it, and as of the middle of this year, 49% of large-cap domestic funds were, in fact, beating the market.
As a general rule, the market rises over time. Out of the past 50 years, there were only 10 when the market ended lower than where it started. If you leave your money in an index fund over time, those funds are likely to outperform actively-managed funds, despite the years when actively-managed funds do outperform. And even in their best years, nearly half are still losing to the market.
If you pick stocks on your own, it pays -- literally -- to take a page from Warren Buffett's playbook, since he's one of the few people with a track record for beating the market. Buffett himself advises individual investors to invest in index funds, and his holding company, Berkshire Hathaway, has a position in one. But most of his equity positions are in individual stocks. There are four goals Buffett has for his own company, and they can help you become a better investor too.
Source Fool.com
