How Warren Buffett invests ‘like a girl’ and wins big in the market

Legendary investor and CEO of Berkshire Hathaway, Warren Buffett is renowned for his unparalleled track record in the world of investing. From 1965 to 2023, his conglomerate has amassed an annualised return of 19.8%. In contrast, the S&P 500 index has returned 10.2% per annum, including dividends. 

But what exactly has allowed Warren Buffett to achieve such remarkable feats? It’s mainly to do with his style of investing, which is characterised to be ‘feminine’. 

Yes, you read that right. There’s even a book – “Warren Buffett Invests Like a Girl: And Why You Should, Too”  – that pretty much sums up the investment philosophy The Oracle of Omaha has followed throughout his investment career.

Let’s explore some of the investing traits that have given Buffett his investment success and how we can channel our inner Warren Buffett to be successful in our investment journey. 

It pays to be patient 

“The stock market is a device for transferring money from the impatient to the patient.” — Warren Buffett

Patience is a cornerstone of Warren Buffett's investment strategy, as evidenced by his approach to holding investments over decades rather than months or years. During his investment tenure, he has seen the dotcom bubble in 2000, the Global Financial Crisis of 2007-2009, the COVID-19 crash in 2020, and more. Even through the many challenging market conditions, he has been patient with the market. 

Women are often stereotyped as overly emotional, but much like Buffett, women actually tend to have a longer-term outlook and have the temperament for investment success. Data from Wells Fargo suggests that women may be more adept at being patient, a crucial aspect of investing. The study revealed that single women tend to trade stocks 27% less frequently than single men. This could be because men tend to be more overconfident, but time and again, it has been shown that it pays to be patient in the stock market. 

One of the most notable examples of Buffett's patience is his investment in Coca-Cola. Buffett first bought shares of Coca-Cola in 1988 and has held onto the stock ever since. 

As a result, Coca-Cola has become one of Berkshire Hathaway's most successful investments, generating significant returns for shareholders over the long term. At the end of 2023, Berkshire’s investment in the soft drinks company was worth US$23.6 billion at a cost of just US$1.3 billion. This translates to a gain of over 1,700%, excluding dividends! 

Buffett's patience extends beyond individual stock holdings to his overall investment approach. He understands that significant wealth is built over time and is willing to wait patiently for the right opportunities to arise.

Be a disciplined investor 

 “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” — Warren Buffett

Along with being patient, Warren Buffett has the discipline to constantly avoid fads and invest only in things he understands intimately (or is within his "circle of competence" as he likes to put it). Did you know he even has a "too hard" pile for ideas outside this circle? Things like cryptocurrencies squarely fall into this bucket for him. 

Buffett’s discipline extends to weathering market volatility as well. While others panic or get greedy, Buffett remains steadfast, applying his principles even in uncertain times. This resolute discipline has been crucial to his long-term success and serves as a valuable lesson for investors.

Citing stock exchange data as of June 2020, Visual Capitalist found that the average holding period of shares was a mere 5.5 months, plummeting from eight years at its peak in the late 1950s.  Patience and discipline go hand-in-hand. While women typically trade less, Fidelity’s study also found that 51% of women would stay the course during market volatility, compared to 43% of men. Market timing, or frequent trading for that matter, can chip away at returns easily. 

The best way to invest without frequently dancing in and out of the markets? Dollar-cost averaging in a low-cost, diversified fund over the long run despite market volatility. This promotes long-term discipline and prevents impulsive decisions that could harm investment performance. 

Master your emotion before it masters you

"Rule No. 1: Never lose money. 
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Rule No. 2: Never forget Rule No. 1.” — Warren Buffett

Having emotional intelligence is another crucial aspect of successful investing, particularly during times of market volatility. Female investors are sometimes perceived to have higher emotional intelligence, allowing them to remain calm and rational during market fluctuations. This allows them to make decisions based on logic rather than emotions. 

During the financial crisis of 2008 and 2009, Vanguard found that men were much more likely to panic and sell their shares at market lows, which meant big losses and missing the start of the market rally post-crisis. Remaining calm and avoiding emotional decision-making during periods of uncertainty would have contributed to better investment outcomes for women.

Warren Buffett himself has emphasised the importance of emotional intelligence in investing, stating that successful investors must have the ability to control their emotions and avoid making impulsive decisions based on fear or greed. 

Buffett's disciplined approach to investing, characterised by rational decision-making and a long-term perspective, reflects his understanding of the role that emotional intelligence plays in achieving investment success.

Investing in the S&P 500 the Warren Buffett way

“The investor’s chief problem — and his worst enemy — is likely to be himself. In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham, Warren Buffett’s mentor

Warren Buffett, while a great stock picker, has often recommended low-cost index funds, such as the S&P 500, for everyday investors as a reliable way to achieve long-term market returns. 

One of the most notable instances where Buffett has praised index funds was in his 2016 Berkshire Hathaway Annual Letter to Shareholders. Buffett discussed his views on passive investing and the benefits of low-cost index funds, and wrote:

"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."

His sharing emphasises that high fees charged by active fund managers often erode the returns that investors could otherwise achieve. Even a somewhat small difference in fees matters over the long run. Buffett advocates for low-cost index funds as a way for investors to avoid these fees and benefit from the overall growth of the stock market.

Unfortunately, women are found to be less price-sensitive than men when it comes to their everyday purchases. They are generally charged more for being willing to pay higher prices. When it comes to investing, it’s crucial that investors of all genders remain mindful of the fees they are paying. This is because high fees also compound over time and erode your returns.

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Practising Buffett and a “girl” way

Here at Endowus, we echo Warren Buffett’s thoughts on being patient, staying invested for the long term, and opting for low-cost investment solutions.

For those who want to invest in the S&P 500 seamlessly, we have the following options to consider: 

• BlackRock iShares US Index Fund: Tracks the S&P 500 index by synthetically replicating it using S&P 500 futures contracts, which means that there will be no US dividend withholding tax.
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• Amundi Prime USA Fund: Tracks the performance of the Solactive GBS United States Large & Mid Cap Index. The index covers the performance of the large and mid-cap segments of the United States equity market and closely tracks the performance of the S&P 500 Index. 

Buying into the S&P 500 alone means missing out on the growth of non-US stocks, such as those in Asia or emerging markets.

On top of US single market funds, the Endowus Flagship Portfolio is designed to give investors broad exposure to tens of thousands of companies with different market capitalisations that are listed on various global markets, providing the benefit of geographical and sectoral diversification in an instant. 

The Flagship Portfolio can also be tailored to include exposure to bonds, so you can diversify your asset allocation beyond stocks. In terms of funding, you can choose to invest in our Flagship solutions using cash, Supplementary Retirement Scheme (SRS), and/or CPF. Check out the offerings from Endowus in the comfort of your home.