Berkshire Hathaway's annual shareholder meeting on Saturday was Greg Abel’s first turn as CEO, and his remarks over the course of the day revealed an investing mindset that balances risk and return.
That's a lesson retirees could learn from.
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In question-and-answer sessions with Berkshire shareholders, Abel emphasized that he plans to stick to the investing course charted by Warren Buffett, an investing guru who grew the conglomerate into a $1 trillion market colossus during his 60-year tenure as CEO.
"A lot of people have this urgency to act," Abel said, but smart investors have to be selective about where and when they deploy their capital. "You have to be disciplined and ready to say no."
Abel clearly communicated that he wants to retain Berkshire's long-term, buy-and-hold philosophy, says Adam Patti, CEO of VistaShares.
"He took great pains, over and over again, to emphasize that the investing discipline will remain," he adds.
That discipline and willingness to say "no" is perhaps best exemplified by Berkshire's stockpile of nearly $400 billion in U.S. Treasurys. This cash hoard gives the company flexibility by letting it avoid taking on debt, as Abel told shareholders: "We do not intend to be beholden to anyone," he said.
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Avoiding borrowing — and the cost it incurs — is a sentiment that Buffett also emphasized over the years.
"In general, we continue to have an aversion to debt, particularly the short-term kind," Buffett wrote in his annual letter to Berkshire Hathaway shareholders in 1992.
That financial independence lets the company determine the best way to deploy capital over time, giving it flexibility as its needs evolve.
The same philosophy works on a smaller scale, like an individual 401(k) rather than a $400 billion pile of corporate cash. With lifespans rising and defined-benefit pensions no longer a feature of private-sector retirement income, retirees have to adopt an investing approach that ensures they don't outlive their money.
Choosing investments for their dividend-yielding potential and avoiding debt are great guidelines for retirees seeking to balance wealth preservation and income generation.
Saying "no" in a frothy market may feel like leaving money on the table, but sticking with your long-term investing plan, prioritizing income generation and avoiding risks that can lead to debt will give you the flexibility to say "yes" to a more financially secure retirement.
