Slow and steady wins race at Buffett table

This week, the JSE moved within a couple of percentage points of record territory - extraordinary when you consider the economy is in serious trouble.

It's one of the great dichotomies facing amateur investors. If you invested only when times were good, you would be overpaying for assets, as markets have an uncanny ability to price the future. However, the risk of investing when times are bad is that they can stay bad for longer than you can afford to stay invested.

For sensible investors, it's all about time, not timing.

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The secret of how best to do it was the subject of extensive discussion this weekend in the US's 43rd-largest city, Omaha, Nebraska, where some 40000 mostly older investors in comfortable shoes and trousers with expandable waistlines gathered to listen to the wisdom of two old guys most investment companies would have put out to pasture decades ago.

With all the hype at the World Economic Forum on Africa gathering in Durban this week, you might have missed one of the world's most extraordinary investor events, the 52nd Berkshire Hathaway AGM, dubbed "Woodstock for Capitalists".

Yesterday, the man variously labelled the world's "most successful investor" and "the Oracle of Omaha", Warren Buffett, 87, and his longtime business partner, Charlie Munger, 93, shared a lifetime of hard-earned wisdom with a football stadium of loyal followers, including a group of more than 50 South African regulars .

Buffett and Munger were heavily influenced by the value investment philosophy of Benjamin Graham, who, like millions of others, saw a sizable fortune reduced to dust during the Great Depression. That experience honed Graham's analytical abilities and he wrote extensively about markets, most notably, his influential The Intelligent Investor in 1949. Those guiding principles are as true today as they were then.

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Understand what you are investing in. Know the market in which the company operates. Pay the right price for shares in companies you would be prepared to own in perpetuity. Pay too much and returns are limited. Understand that it can take the market a long time to fully appreciate the value of a great business, so think differently to the herd.

There is an apparent contradiction. While at the helm of Berkshire Hathaway, a textile-milling business he converted to an investment firm, Buffett has delivered an average of 20%-plus per year to investors since 1965, double the average return of the S&P 500, yet, famously, he has instructed the executors of his estate to invest the bulk of the fortune in passive, index-tracking funds after his death.

Buffett's support for index funds is a vote of confidence in the long-term ability of shares to deliver better returns than cash or bonds.

Statistics show that ordinary investors are more likely to grow their wealth over time by paying less in fees to expensive fund managers and allow the 1% they are saving to compound the value of their overall investments.

Markets and economies are seldom in sync, especially in South Africa. While our economy has bumbled along since the short-lived boost of the 2010 World Cup, prices have soared. What do you as a South African investor learn from all of this? If you are invested and have a 10- to 20-year time horizon on your investments, stay invested.

Investors in South Africa have to be thick-skinned. Too many second-guess their decisions and, after a year or two of sluggish or even negative returns, are tempted to give up on investing in markets.

My grand plan after listening to the great Oracle of Omaha? I am going to make a clutch of those tacky little plastic desktop sandwich boards carrying the message: "You don't have to be mad to invest here, but it helps." I suspect there will be a market for them, in the next year or two, at least.

Whitfield is a public speaker on the political economy and an award-winning financial journalist, broadcaster and writer