2 Important Lessons From Warren Buffett’s 2017 Annual Shareholders’ Meeting

Warren Buffett and his long-time business partner Charlie Munger typically hold their annual company’s annual shareholders’ meeting in early May each year. The meetings tend to draw massive crowds due to the business, investing, and life lessons that Buffett and Munger often dispense. In recent years, the number of attendees have risen to around 40,000.

This year’s meeting was held last week on 6 May 2017. Let’s look at two important lessons shared in the recent meeting.

1. On speculation head here

2. On the exorbitant fees charged by hedge funds

Buffett has always been against the hedge fund industry and the high fees charged by those funds. He said during the meeting:

“In all the professions there is value added by the professionals, as a group, compared to doing it yourself. In the investment world, that isn’t true. Active managers cannot do better than the aggregate of the people who just sit tight.”

Even if the fund does not perform well, the fund manager still gets paid for “lousy performance.” Buffett added:

“In any other field, that would just blow your mind. People get so used to it in the field of investment.”

He recommended investors to put their money in a low-cost index fund instead of giving them to professionals. The fees charged by the professionals would easily eat into the gains made.

Buffett sang the same tune in his firm’s 2016 annual report released in February this year. He wrote (emphasis is mine):

“A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.”

“The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”

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