A crucial detail everyone missed in Warren Buffett's letter

For decades, Warren Buffett’s annual letters to Berkshire Hathaway shareholders have been a treasure trove of wisdom, eagerly anticipated by investors around the globe.

Yet, behind the brilliance of these letters lies the perfect mental model: they were written with a very special reader in mind—his sister, Bertie.

Buffett shares, “In visualizing the owners that Berkshire seeks, I am lucky to have the perfect mental model, my sister, Bertie.”

He went on to say that his sister is smart, sensible and nobody’s fool—but isn’t ready for a CPA exam and doesn’t consider herself an economic expert.

With this approach, his letters are not only profoundly insightful, but also incredibly accessible, without any unnecessary complexity.

This year, he finally reveals the most critical information about Bertie.

Bertie has good-looking daughters absolutely crushed it in the stock market.

Here’s what he said, “Bertie – yes that Bertie – spent her early formative years in a middle-class neighborhood in Omaha and, many decades later, emerged as one of the country’s great investors.”

How did she do it?

Bertie Buffett started becoming active in the financial markets in 1956 and for the next 20 years, Bertie held bonds, put one-third of her funds in a publicly-held mutual fund and traded stocks actively.

Then, in 1980, at 46 years old, without any prompting from Warren, Bertie made a pivotal move. She decided to sell off everything and owned only the mutual fund and Berkshire Hathaway stocks, both diversified in nature, and made no new trades during the next 43 years.

During that period, she became extremely wealthy, even after making large philanthropic gifts (nine figures).

Turns out, Warren isn’t the only Buffett who became wealthy from the stock market.

The story of Bertie Buffett reinforces several timeless investment principles:

1. Minimize Trading Activity: Portfolio activity doesn’t always translate into stock market performance. You want to be lazy when it comes to portfolio activity, which is counterintuitive to most things in life. If you want the stock market to work its magic and grow your wealth, you need to remain invested.

2. The Power of Time: Starting early (or living a long life) for a long runway for your investments to grow is critical. Compounding, by nature, begins modestly but accelerates exponentially over time.

3. Construct a Resilient Portfolio: A mutual fund is diversified in nature, and Berkshire Hathaway itself is an umbrella of great businesses, both private and public. Berkshire has multiple income streams that enable Buffett to allocate the capital and take advantage of opportunities when stock markets crash and everybody runs for cover.

It is worth sharing Bertie Buffett’s story because it shows that we don’t necessarily need to overcomplicate investing to build wealth in the stock market. The majority of people would do perfectly well by regularly investing in low cost index funds.

Invest wisely,

Thomas

P.S.

Over at the Steady Compounding Investing Academy, my mission is to help you identify stocks and master the behavioral traits that are needed to grow your wealth over the long term. My investing philosophy encapsulates many of the principles that I’ve learned over the past 15 years from studying the greats such as Buffett, Munger and more.

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Here's me at last year's Berkshire AGM