Warren Buffett is, by most accounts, one of the most successful investors in history. The CEO of Berkshire Hathaway has amassed billions of dollars (more than $65 billion, at last count) through his savvy understanding of corporations' performance and the stock market.
But investing like Warren Buffett isn't easy, and an examination of Berkshire's holdings indicates that average investors might not necessarily benefit by following his every move.
Here's a look at some reasons to avoid investing like Warren Buffett.
1. Because You Can't
We can all try to invest like Warren Buffett, but at a certain point it will be clear that he can do things that us mere mortals can't. Buffett has access to information that most people wish they had. He's super wealthy, so he can buy shares in much larger quantities and take risks that we simply can't. He has mountains of cash, and the reputation to cut deals that we can't make. He has access to different types of investments (preferred stock, venture capital) that are often unavailable to non-wealthy people. It's possible to follow his general approach to investing, but at a certain point it's nearly impossible to do what he does.
RELATED: Warren Buffett through the years
Warren Buffett through the years
Warren Buffett through the years
Investor Warren Buffett answers reporters' questions during a press conference to announce that Walt Disney will buy Capital Cities/ABC July 31.
Billionaire investor Warren Buffett of Omaha makes a rare public appearance during an autograph session outside Borsheim's Jewelry Store in Omaha, May 4. Buffett was signing autographs for shareholders in his company, Berkshire Hathaway, which is having its annual meeting May 5.
Billionaire businessman Warren Buffett sits with his wife Susan (R) and daughter Susie, prior to the annual Berkshire Hathaway shareholders meeting in Omaha, May 5. This marks a rare public appearance for the reclusive Buffett.
Arnold Schwarzenegger, Republican candidate for governor of California
in the October 7, 2003 recall election listens as world famous
investor, Warren Buffett (L), one of his financial advisors, speaks to
reporters after a meeting of Schwarzenegger's Economic Recovery Council
in Los Angeles August 20, 2003. REUTERS/Fred Prouser
Billionaire financier Warren Buffett looks on after a meeting with U.S. Senator Arlen Specter (R-PA) and chairman of the Senate Judiciary Committee, at the Hart Senate Office Building on Capitol Hill in Washington June 29, 2005. Specter is the co-author of a bill seeking to create a $140 billion asbestos compensation fund. REUTERS/Shaun Heasley SH/TC
Billionaire Warren Buffett arrives at the Sun Valley Resort in Sun Valley, Idaho July 10, 2007. The world's biggest media chiefs gather this week at the 25th annual Allen & Co. conference at the resort starting today. REUTERS/Rick Wilking (UNITED STATES)
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at a Senate Finance Committee hearing about "Federal Estate Tax: Uncertainty in Planning Under the Current Law" on Capitol Hill in Washington, November 14, 2007. Billionaire Buffett warned of widening U.S. income disparity and endorsed the estate tax as a check on wealth accumulation, while two senior lawmakers said they want the tax repealed. REUTERS/Jason Reed (UNITED STATES)
Billionaire financier and Berkshire Hathaway Chief Executive Warren Buffett greets shareholders during the Berkshire Hathaway Annual Shareholders meeting in Omaha, Nebraska May 3, 2008. REUTERS/Carlos Barria (UNITED STATES)
Billionaire investor Warren Buffett laughs as he appears with Microsoft Corporation founder Bill Gates for a town hall style meeting with business students broadcast by financial television network CNBC at Columbia University in New York, November 12, 2009. REUTERS/Mike Segar (UNITED STATES BUSINESS)
Berkshire Hathaway Chairman Warren Buffett kisses his ukulele at the Berkshire Hathaway annual meeting in Omaha May 1, 2010. Buffett played "I've Been Working on the Railroad." REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS TRANSPORT)
Billionaire financier and Berkshire Hathaway Chief Executive Warren Buffett (L) and Microsoft founder Bill Gates gesture at the national launch ceremony for the BYD M6 vehicle in Beijing September 29, 2010. Chinese battery and car maker BYD, backed by Buffett, launched its first premium multi-purpose vehicle (MPV) in Beijing on Wednesday to tap rising demand in the world's biggest auto market. REUTERS/Jason Lee (CHINA - Tags: TRANSPORT BUSINESS)
Billionaire Warren Buffett, wearing a traditional tikka or a red mark on the forehead, speaks during a news conference in Bangalore March 22, 2011. Buffett on Tuesday said he is looking to invest in large countries like India, China and Brazil, but added that restrictions on foreign ownership in India's insurance industry could be a deterrent. Buffett also said and the U.S. economy was improving and that the devastating earthquake in Japan would not hurt global growth. REUTERS/Stringer (INDIA - Tags: BUSINESS)
Berkshire Hathaway Chairman Warren Buffett tours the floor of the New York Stock Exchange September 30, 2011. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS)
Berkshire Hathaway chairman Warren Buffett holds his hand over his heart during the singing of the national anthem, at the start of a 5km race sponsored by Brooks Sports Inc., a Berkshire-owned company, in Omaha May 5, 2013, a day after the company's annual meeting. Buffett at the meeting on May 4, 2013 gave the most extensive comments to date about the future of Berkshire Hathaway Inc after he is gone, saying he still expects the conglomerate to be a partner of choice for distressed companies. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS SPORT ATHLETICS)
Warren Buffett, Chairman of the Board and CEO of Berkshire Hathaway, poses for a portrait in New York October 22, 2013. REUTERS/Carlo Allegri (UNITED STATES - Tags: BUSINESS)
Roberta Buffett Elliott sits with her brother Warren Buffett as they attend an announcement ceremony at Northwestern University in Evanston, Illinois, January 28, 2015. The sister of financial investor Warren Buffett has given Northwestern University more than $100 million to create the Roberta Buffett Institute for Global Studies, the largest single gift in the school's 164-year history, the university said on Wednesday. REUTERS/Jim Young (UNITED STATES - Tags: BUSINESS EDUCATION SOCIETY)
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at the Fortune's Most Powerful Women's Summit in Washington October 13, 2015. REUTERS/Kevin Lamarque/File Photo
Warren Buffett, chairman and CEO of Berkshire Hathaway, smiles before speaking with Bill Gates (not pictured), at Columbia University in New York, U.S., January 27, 2017. REUTERS/Shannon Stapleton
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2. His Goals Aren't the Same as Yours
The average person should be investing with long-term growth in mind, focused primarily on building a large retirement fund. An older investor might invest for income through dividend stocks and bonds. Berkshire Hathaway's investment motives, however, are far more complex. While it is focused on building wealth over the long-term, it also makes decisions to please its shareholders in the short-term. It makes acquisitions that don't make sense immediately, but have a broader strategic value.
3. He's Not Very Diversified
Berkshire Hathaway is a large and sprawling company with investments in a wide range of industries. But most of the company's holdings are still comprised of a handful of companies. More than half of the company's value is tied up in its stakes of Kraft, Coca-Cola, Wells Fargo, and IBM. Nearly 40% of Berkshire's portfolio stems from the consumer staples sector, while another 30% is tied up in financials. Meanwhile, the company has relatively small investments in major sectors including health care, energy, or telecommunications.
4. He Sometimes Invests With His Heart, Not His Head
Yes, even Warren Buffett is known to invest with his heart rather than his head. Not all of his investments are unemotional and purely driven by cold facts. Consider his affection for Coca-Cola. (He's known to drink several Cokes a day.) While it's true that Coca-Cola is one of the stock market's great success stories, it's actually underperformed the broader stock market over the last five years. Despite this, Buffett's Berkshire Hathaway has about 400 million shares of Coca-Cola, or 9% of the company.
5. He's Missed Out on Technology
When tech took off in the 1990s, Warren Buffett was not on board. No big investments in Microsoft, Apple, or Cisco. And he's also declined to invest in recent tech success stories including Alphabet (neé Google), Amazon, Netflix, or Facebook. He is a big investor in IBM, but bought shares late in the game and the company has had several years in a row of declining revenues.
Buffett has said he hasn't invested in tech because he doesn't understand it. While it's wise to avoid investing in something you don't understand, it also means he's missed out on some big gains over the years.
6. You're Better Off With Mutual Funds and ETFs
Warren Buffett is a great stock picker. His Berkshire Hathaway is a sprawling firm with investments in a wide range of companies in various industries. But for most people, it's foolish to try to invest in individual companies and expect to beat the broader stock market. It takes a lot of work to assemble a well-balanced portfolio if you're buying individual stocks. Mutual funds and exchange-traded funds offer the ability to invest in the broader stock market without worrying about share prices of individual companies.
7. He's Too U.S.-Centric
There's nothing wrong with betting on America and its companies. But a well-diversified portfolio should also have a good amount of international exposure, and Warren Buffett has tended to invest heavily in U.S.-based companies while ignoring the potential growth from overseas firms.
The suggested amount of exposure to international and emerging market stocks varies depending on the investor's age and goals. But Morningstar's Lifetime Allocation Indexes are one possible guide. These indexes, which offer a mix of investments appropriately balanced for a person's retirement age, have between 10% and 40% invested in non-U. S. stocks. Morningstar suggests holding more international stocks the further you are from retirement.
Warren Buffett hasn't eschewed international investing entirely, as Berkshire Hathaway does have holdings in European insurance companies and recently bought a German motorcycle accessory manufacturer. And some Berkshire holdings, including Coca-Cola and IBM, do have a significant overseas presence. But many of Berkshire's top holdings, including U.S. Bancorp, Wells Fargo, and Charter Communications, offer very little international exposure.
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“Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time” by Howard Schultz (CEO of Starbucks)