90/10 Portfolio: Buffett's Surprisingly Simple Advice for Non-Professional Investors

Buffett's Investment Best Practices

Focus on Business Fundamentals

• Focus on the future productivity of the asset, not price fluctuations
• Think of stocks as small portions of businesses, not ticker symbols
• Evaluate investments based on their intrinsic value and earnings power
• Understand that a wonderful business at a fair price is better than a fair business at a wonderful price

Investment Decision Framework

• Only invest in what you understand and can reasonably estimate earnings for
• Define your "circle of competence" and stay firmly within it
• Ignore macroeconomic forecasts, market predictions, and daily price movements
• Maintain a long-term perspective; market timing rarely works consistently

Temperament and Mindset

• Be fearful when others are greedy, and greedy when others are fearful
• Market volatility is an opportunity, not a risk, for the prepared investor
• Avoid activity for its own sake; trading costs and taxes reduce returns
• Let compound interest work its magic through patience and time

Building Your Portfolio

• Non-professionals should consider low-cost index funds (90% S&P 500, 10% short-term government bonds)
• Diversify but don't "di-worse-ify" with mediocre investments
• Accumulate shares over a long period and never sell when news is bad
• Minimize costs and tax impacts to maximize long-term compounding

Risk Management

• Maintain financial strength and substantial cash reserves
• Define risk as permanent loss of capital, not price volatility
• Never depend on the kindness of strangers (excessive leverage)
• Remember that reputation and integrity are your most valuable assets

"Price is what you pay, value is what you get." - Warren Buffett