So, the speculation has finally been put to rest. Warren Buffett, arguably the world's greatest investor has finally announced an investment manager who would help him oversee Berkshire's portfolio. Indeed, many were stunned when he picked the relatively unknown 39-year old fund manager Todd Combs. But not for nothing is Buffett such a successful investor. Throughout his long career, he has shown an uncanny knack of backing the right people more often than not. And this time too, we believe it should be no different.
So, what qualities did Mr Combs possess that tipped the scales in his favour? He is certainly not an investing luminary. Nor has his track record gotten so much of attention. Money News reports that it is Mr Combs approach that won over the approval of the Oracle of Omaha. Mr Combs, it is believed, has a really good eye for spotting all the relevant risks in an investment.
Spotting investment risks? Is that what Buffett was looking for, you would wonder. Indeed. We believe that a fund manager's job is not about picking the next multibagger. On the contrary, he should always strive to protect his downside risk. As Buffett puts it quite wonderfully, "Our defense has been better than our offense".
Hence, the next time you are looking at an investment, try to focus on defense rather than offense. In other words, try and minimise your downside risks. Look for companies that you understand, both business wise and financially and that you believe has some sort of a competitive advantage. See to it that it is run by honest and sincere people and finally ensure an appropriate margin of safety before taking in the plunge. There are strong chances that this approach could help you beat the benchmark indices comfortably over the long term. It has certainly done so for a lot of successful investors like Warren Buffett.
If you were to nominate one person who could step into Buffett's shoes, who would it be and why? Tell us or share your feedback on our Facebook page
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