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Good investing is boring

Buffett probably wouldn’t be offended by Musk’s comments since analyzing company fundamentals and looking at less flashy and exciting industries is at the heart of his investing style.

He isn’t the only one to take this approach. George Soros, another famous investor, once said, “If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring.”

Value investing, which Buffett is a proponent of, is focused on finding beaten-down and overlooked companies. Berkshire Hathaway's portfolio, for instance, includes DaVita HealthCare Partners (DVA), a network of kidney dialysis centers, and Louisiana-Pacific (LPX), a manufacturer of engineered wood panels.

Buffett’s game plan seems to be focused on finding strong companies that generate steady cash flows and deliver predictable performances, rather than chasing innovation or high-stakes ventures.

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Boring is key to building wealth

Launching a successful business is incredibly difficult. One in four small businesses fail within the first year, according to the U.S. Bureau of Labor Statistics (BLS). Operating a business is significantly more difficult when economic conditions are not favorable. Amid high interest rates and a pullback in consumer spending, total bankruptcies — including consumer, small business and big corporates — have been climbing steadily for 20 months up to April, according to Epiq data cited by Bloomberg.

So your chances of running a successful business, let alone a trillion-dollar tech giant, are slim. Your chances of earning long-term investing success with stock picking are also abysmal. Even professional hedge fund managers have underperformed the S&P 500 and Nasdaq in the first three months of 2024, according to PivotalPath’s Equity Sector Index.

In other words, a retail investor who simply invested in a low-cost index fund that tracks the S&P 500 would have outperformed this hedge fund index.

In fact, even Berkshire Hathaway stock is barely able to outperform the S&P 500 index. Its shares are up 12.7% so far in 2024, while the benchmark is up 10.5%.

This illustrates the magic of boring investing. You don’t need to reinvent the wheel or uncover the next big tech breakthrough to generate wealth. Simple, boring investing and compounding truly is a potent combination that all retail investors should take advantage of.

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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