Warren Buffett: A Practical Understanding of Financial Literacy Extended to Managing Investments

Christian-Koch-on-Warren-Buffett

Dr. Christian Koch of KAM South in Atlanta, GA presented a study on Warren Buffett to the The Tenth International Conference on Engaged Management Scholarship:

Warren Buffett: A Practical Understanding of Financial Literacy Extended to Managing Investments

Dr. Christian Koch
Muma College of Business
UNIVERSITY OF SOUTH FLORIDA

ABSTRACT

2020 has been a time of unprecedented change. Financial markets and consumer confidence have collapsed. The unemployment rate has reached double digits; the United States appears headed into a recession. Financial planning is in more demand as individuals and financial markets react to the COVID-19 pandemic.

The increased demand highlights financial literacy concerns around managing investments. Since investment financial decision making can be a complex web with multiple factors, industry practitioners take various approaches to it. Often, people involved in the market make irrational decisions that violate sound judgment and basic economic investment principles. Therefore, financial advisors need to become leaders in adopting new research into practice that can advance financial literacy knowledge.

Warren Buffett offers unconventional success to the fundamental approach to managing investments. Despite his success and large following in the investment world, Buffett’s approaches have not been passed to Americans. In this article, we use a thematic qualitative study to analyze Buffett’s approaches to managing investments by examining 11 years of his comments via the Warren Buffett Archive. Our analysis yields eight critical findings that are well-suited for industry, practitioners, and investors to make better, more informed investing decisions; two findings are uncommon approaches to managing investments.

Read the Full Paper, here

There are eight key tips for investors based on Dr. Koch’s study of Warren Buffett was featured in USA Herald:


Eight of Buffet’s key tips for investors, based on Dr. Koch’s study:

1. Holding cash is always the “default option” if there’s nothing smart to do.

2. Take advantage of compound interest to make your money grow faster. Buffet said it behaves like a “snowball of sticky snow.”

3. Be wary of inflation, which Buffett calls “the investor’s enemy.” He said the best defense against it is personal earnings power, and the second-best hedge is owning a wonderful business.

4. Keep a close watch on the “Buffett indicator.” This ratio, which measures the total value of all listed equities in the market relative to the total size of the economy, can be used by investors to help them determine whether stocks are overvalued.

5. Holding shares is owning a business. When buying shares, Buffett looks at himself as a minority owner in the company and takes a long-term view of its prospects.

6. Be patient. Buffett reminded investors that having the patience to wait for the right opportunity is vital.

7. Control your emotions. Buffet said investors “have to have an emotional stability that will take them through almost anything.”

8. Beware of stampedes. Buffett flagged the risk of mass panic and everyone rushing for the door. “There is an electronic herd of people around the world managing huge amounts of money who think that a decision on everything in their portfolio should be made, basically, daily or hourly or by the minute.”

Read the full article in the USA Herald, here.

 

Koch’s study was also featured in the online news source, Lastest News.

 

 


Contact Christian Koch, CFP®, CPWA®, RICP®, CDFA™
President & CEO | KAMSouth
to learn more about how to take control of your financial future:
(404) 843-3745