Buffet is an investor, not a trader

Buffet's annual letter was out yesterday. All kinds of bad news and mistakes you had made in the past year. The letter is widely interpreted as an excuse for bad performance last year because the most prominent investor also had the worst one in his 44-year span. In the mean while, the Buffet auro is also dimmed a bit 'cause his portfolio is not bullet-proof either. Many traders, fund managers, and institutional investors presenting online or iTune commented that Buffet's picks are not all that impressive.

Is that so?

Buffet's power investment ways are margin of safety, find good businesses to invest, and compound of return. Even he admitted that he had done dumb things, these principles are still in place.

For margin of safety, all investments in 2008 are preferred stocks or allow him to retreat if not going well. At the same time, he regards GE, GS, WFC, JNJ and the like are good businesses because they can compound returns so that he can buy more. This makes perfect sense along his thinking. Put it in another way, if a real estate owner can consistently find tenants to lease his house with good rents so that he can have decent income flow out of it. Does he care how much his house cost? Remember that he is not going to sell the house but interested in the fixed income generated out of it. If he has tons of houses so that the income flow is significant, he just loves the way he feels comfortable for some 40 years.

The traders alike just don't have the view Buffet has on investment because of the capital disparity and understanding of investment.