3 Lessons From Warren Buffett and the 2021 Berkshire Hathaway (BRK) Annual Meeting

Warren Buffett is arguably the greatest investor of all time. He’s certainly the most successful in terms of absolute wealth.

He’s gone from $0 to $100 billion in his lifetime – purely through investing, and that’s after giving away billions of dollars to charity already. Now, I’m not here to tell you that you, too, can become a billionaire. But we don’t have to become billionaires to be financially independent and do whatever we want with our lives.

I’m nowhere near a billionaire, yet I retired in my early 30s from my car dealership day job. I now live off of the growing dividend income my stock portfolio generates for me. And I can say that I owe a lot of my success to Buffett’s timeless teachings – across both investing and life.

Warren Buffett and Charlie Munger hosted the 2021 Berkshire Hathaway (BRK) annual meeting this past weekend.

Anytime two billionaires get together and freely express their thoughts, you’re gonna learn something. Well, as usual, they dropped some valuable nuggets on the investing community.

These are totally free lessons that can make all of us better, smarter, and richer investors and people. I want to share with you three of my favorite takeaways from this year’s Berkshire Hathaway annual meeting.

Ready? Let’s dig in.

Warren Buffett Lesson #1: Diversification

The first lesson I want to share with you is the importance of diversification.

Buffett showed slides at this year’s meeting comparing the top 20 companies in the world in 1989 to the top 20 companies in the world in 2021.

Guess what? None of the top companies in 1989 are still top companies today.

Buffett used this exercise as an important reminder that because we can’t predict the future, the best thing to do is to diversify our portfolios.

That can be done by owning a lot of stocks yourself or going out and paying a fund company to do it for you.

Buffett noted that while the boats in general are moving along at a nice pace, it’s very difficult to pick exactly the right boat at the right time.

Indeed, I just put out an article highlighting how important diversification is. I have over 100 stocks in my own portfolio because, well, I don’t possess a crystal ball. Do I have confidence in all of these businesses? Absolutely. But it also wouldn’t completely shock me if a few of them don’t do well or even fail over time. Anything can happen at any time.

There’s no need to overly concentrate yourself these days. Information and trades are cheaper and more accessible than ever before.

I look at each stock in my portfolio as a golden goose laying ever-more golden eggs. I live only off of those golden eggs and let the golden geese get bigger and fatter over time. This is a huge, happy gaggle. Voluntarily riding it out with a smaller gaggle of golden geese for no good reason strikes me as silly.

Warren Buffett Lesson #2: Everyone makes mistakes

The second lesson? Even the greatest make mistakes.

Warren Buffett had to explain and defend numerous questionable investment decisions over the last year.

Decisions like selling airlines at the bottom, lightening up on the bank investments, and trimming the large position in Apple. Oh, and how about not being more greedy when everyone else was fearful in the spring of 2020. Could Buffett have done a lot of things way better, with the gift of hindsight? Absolutely.  What does this tell you?

Everyone makes mistakes. It’s okay. We’re all human.

Warren Buffett is 90 years old. He’s been investing since he was 11 years old. If Buffett can and does make mistakes with almost 80 years of experience under his belt, where does that leave the rest of us? You can imagine that we’re going to make some big mistakes over time.

Nobody’s perfect. Buffett isn’t. I’m certainly not. The great thing about mistakes, though, is that we can use them as an opportunity to learn and grow.

Investing is so interesting partially because every day is a new day. I’ve been investing for more than 10 years now, yet I’m still learning new things constantly. I make mistakes. And then I learn from them and get better and smarter. Use your mistakes to your advantage rather than sulking. Make those mistakes. Then learn from them so that you don’t make them again.

Warren Buffett Lesson #3: Perfection is impossible

The third lesson is a nice transition and follows up on the point about mistakes. The final lesson is this: Don’t seek perfection.

Buffett was asked about his feelings regarding being invested in oil companies and whether or not its moral.

His initial response was great, which hits home on avoiding extremism: “People who are on the extreme of both sides are a little nuts. I would hate to have all hydrocarbons banned in three years. It wouldn’t work. And on the other hand, what’s happening will be adapted to over time.”

Extremism is unhelpful at best and harmful at worst. But Buffett took it a step further and dropped perhaps the biggest truth bomb of the whole meeting.

He noted that if you seek perfection in life, you’ll be sadly disappointed: “There’s something about every business that, if you knew it, you wouldn’t like it. If you expect perfection in your spouse or in your friends or in companies, you’re not going to find it.”

Perfection is impossible. No stock, business model, portfolio, friend, spouse, or idea is without its faults.

So when you go about building a portfolio and picking investments, don’t shoot for perfection. Aim to invest in the best businesses you can find at the most attractive valuations you can find. Seek conviction, not perfection. And if there’s something you don’t like about a business, just keep in mind that you won’t find any business out there with something you don’t like about it. Life, businesses, and people are all highly imperfect.

I picked these three lessons in particular for specific reasons.

They work in unison and complement one another. Furthermore, in typical Buffett style, they apply to both investing and life.

Summing it up, broadly diversifying your portfolio is admitting to basic truths. We’re all imperfect humans investing in imperfect businesses. Businesses will make mistakes. Investors will make mistakes. But that’s okay. Because we’ll learn and grow. In the end, if we have an armada of ships taking us to the promised land of greater wealth and passive income over the coming decades, we’ll be just fine.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.