TIME Warren Buffett

Inside Buffett’s Bold Burger King Bet

2013 Getty Images

The burger chain is moving to Canada, by way of Omaha

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This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

By Dan Primack

Warren Buffett is finally getting into the burger business.

Buffett’s Berkshire Hathaway has agreed to help finance Burger King’s purchase of Canadian coffee-and-doughnut chain Tim Hortons.

The deal, first reported by The Wall Street Journal, was officially announced Tuesday morning. The two companies said they have agreed to merge, bringing together Burger King, which is majority-owned by Brazilian private equity firm 3G Capital, and Tim Hortons, creating an $18 billion quick-serve restaurant behemoth.

The two companies said that Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 shares of the new, combined company for each Tim Horton share they currently own. When the deal is closed, 3G Capital will own about 51% of the combined company.

For the rest of the story, please go to Fortune.com.

MONEY

Why I Cried When Berkshire Hathaway Hit $200,000 a Share

Crying baby
Robert Holmgren—Getty Images

Lessons from a guy who sold his stock in Warren Buffett's company for just $4000

The A shares of Berkshire Hathaway, the company run by superinvestor Warren Buffett, closed above $200,000 a share yesterday. But all I could think of was another number—$400,000—which is roughly the amount I’d be ahead today if I hadn’t foolishly sold Berkshire many years ago. Clearly, I screwed up. But maybe you can profit from my blunder in your own investing.

Here’s how it happened.

After the stock market crashed in October 1987, I noticed that Berkshire Hathaway shares, which had been selling for more than $4,000 in the months leading up to the crash, had dipped to around $3,000 a share. I’d long admired Buffett as an investor, and especially liked his views about long-term investing. He once said in one of his famous annual letters to Berkshire shareholders that his “favorite holding period is forever.”

So I decided to buy two shares for $3,000 apiece in November of 1987. At first, they dropped even more. But, like Buffett, I was in for the long term. So I held on. And before long, Berkshire’s share price began to climb, passing $3,900 a share by April, 1988.

It was about then that a little voice began whispering in my ear: “Maybe you should sell.” It continued: “You’re up $1,000 a share, two thousand bucks, in just seven months. That’s pretty damn good.” I resisted at first. But I began to weaken, inventing rationales about why Buffett’s long-term philosophy didn’t make sense in this instance. “Who in his right mind is going to pay almost $4,000 for one share in a company? The last time these shares sold at this level, look what happened: they dropped by 25%. Get out while the getting is good.”

When the share price hit $4,000 in June of 1988, I bailed, netting myself a nifty little profit of $2,000, before brokerage commissions. My initial trepidation at selling gave way to delusions of grandeur. I felt escstatic: a $2,000 profit on a $6,000 investment in just seven months. Look at the way I’ve navigated the stock market, I told myself. I’m displaying truly Buffett-esque qualities.

But air began leaking from my inflated sense of my investing abilities when I saw that Berkshire shares continued to rise. And rise, and rise. A year later, they were selling for more than $6,500 a share. A few years after that, they cracked the $10,000 mark. In 2006, they hit six-figure territory, more than $100,000 a share. Sure, there were ups and downs along the way. But it was pretty clear that my genius move wasn’t such a genius move after all. Had I held on, I would own two shares worth $405,700, giving me an annualized return of about 17% based on my intial $6,000 investment. The Standard & Poor’s 500 index gained roughly an annualized 11% over the same span.

So, what lesson can you take from my Berkshire experience and apply to your own investing, whether for retirement or any other purpose?

Well, first I want to be clear that I’m not suggesting that you invest a substantial sum in Berkshire Hathaway—whether through the A shares or, more likely, the B shares, which closed at a mere $135.30 yesterday—in hopes of extravagant gains. You can always find examples of great stocks that generated dazzling returns. But there are also plenty of stocks that people were sure would be winners that flamed out. So the mere fact that, looking back, we can all see that Berkshire did extraordinarily well doesn’t mean it would have been a wise move years ago or a smart move now to concentrate one’s money in it, or any other single stock or small group of stocks.

And, in fact, the money I invested in Berkshire back then was a small portion of my investable assets. I held the overwhelming majority of my savings in a well-rounded and broadly diversified portfolio. So as chagrined as I was and am that I didn’t hold on to those Berkshire shares, my financial future wasn’t riding on them.

Rather, the real lesson here is that many times you will be tempted to deviate from your core investing principles or your long-term strategy. When the market is soaring, you may be tempted to shift bond holdings into stocks. That’s where the returns are, no? Or after the market has cratered, you may come to see stocks as far too risky and feel a strong urge to dump your stock holdings and hunker down in the safety of cash or bonds. After all, who knows how much lower stocks can fall and how long it may take them to recover?

Similarly, while you know that plain-vanilla low-cost index investments are a proven way to reap the rewards of the financial markets over the long haul, you could still find yourself intrigued by a pitch for a high-cost investment that purports to offer outsize gains with little downside risk. The people who peddle such illusions can be mighty persuasive.

But if you abandon your long-term strategy every time the markets get rocky or a clever salesperson dangles a shimmering investment bauble before your eyes, you won’t have a strategy at all. You’ll be flying by the seat of your pants.

Which is why at such times it’s crucial that you take a moment to remind yourself of why you have a long-term strategy in the first place. It’s so you won’t end up simply winging it. And having done that, you’ll have a better chance of ignoring that voice whispering in your ear. I wish I had.

Walter Updegrave is the editor of RealDealRetirement.com. He previously wrote the Ask the Expert column for MONEY and CNNMoney. You can reach him at walter@realdealretirement.com.

More from Real Deal Retirement:
Do You Really Need Stocks to Invest for Retirement?
How an Early Start Can Net You An Extra $250,000
5 Tips for Charting Your Retirement Lifestyle

MONEY tech stocks

Which 80-Year-Old Billionaire Would You Trust With Your Tech Portfolio?

Diptych of Warren Buffett and George Soros
Mark Peterson/Redux (Buffett)—Luke MacGregor/Reuters (Soros)

Billionaire hedge fund manager George Soros and billionaire investor Warren Buffett are both buying tech stocks—but decidedly different kinds. So who would you bet your portfolio on?

Both billionaire investor Warren Buffett and billionaire hedge fund manager George Soros have had somewhat troubled relationships with tech stocks over the years.

Buffett famously punted on tech throughout the 1990s, declaring that “we have no insights into which participants in the tech field possess a truly durable competitive advantage.” So his investment company Berkshire Hathaway severely lagged the S&P 500 in the late 1990s — but at least it missed the tech wreck in the early 2000s. For Soros, the opposite was the case: His fund stayed at the Internet party too long in 2000.

Recently, though, both octogenarians have been dabbling in this sector — but in decidedly different ways.

SEC filings released on Thursday indicate that while Buffett is looking to the past for time-tested but overlooked plays on this sector, Soros seems only to be interested in future trends.

Buffett and ‘Old Tech’

Buffett is taking the old school approach. Quite literally. His tech sector holdings — indeed, his entire portfolio — looks as if it was straight out of the early or mid 1990s.

For instance, one of his biggest tech holdings, which recent SEC filings indicate he’s been adding to, is the century-old IBM INTERNATIONAL BUSINESS MACHINES CORP. IBM 0.1563% .

This technology service provider — which has run into difficulties in the crowded cloud computing space lately — has seen its revenue growth decline for several quarters while its stock has been under fire.

IBM Chart

IBM data by YCharts

No doubt, Buffett clearly sees IBM as a value, as the stock trades at a price/earnings ratio of around 9, which is about half what the broad market currently trades at. In his most recent letter to Berkshire shareholders, Buffett described IBM as one of his “Big Four” holdings, along with American Express, Coca-Cola, and Wells Fargo.

Beyond IBM, Buffett prefers lower-priced but slower growing internet backbone companies to fast-growing but pricey content providers. This is part of a tech investing trend that MONEY contributing writer Carla Fried recently addressed.

Other stocks he recently purchased or positions that he has been adding to include the Internet infrastructure company Verisign VERISIGN INC. VRSN 1.0714% and internet service providers Verizon VERIZON COMMUNICATIONS INC. VZ 0.8298% and Charter Communications CHARTER COMMUNICATIONS INC. CHTR 0.5512% .

Soros’ ‘New Tech” Bets

By contrast, Soros seems to be trying to ride current and future trends — albeit with highly profitable names.

In the second quarter, Soros added to his stake in the social media giant Facebook FACEBOOK INC. FB 1.3066% . Last month, Facebook shares hit a record high after the company reported robust profits. Plus, Facebook has proven to Wall Street that it can conquer the mobile advertising market, as nearly two-thirds of its revenues now come from mobile ads.

Facebook isn’t the only mobile bet Soros is making. He has also been recently adding to his stake in Apple APPLE INC. AAPL 0.2445% , which along with Google dominates the mobile computing space. New data from IDC showed that Apple’s iOS operating system held about a 12% market share among phones shipped in the second quarter — even though demand for iPhones has fallen as consumers await the arrival of the new iPhone 6, which will be introduced in September.

For the moment, Soros’ bets on these new tech names seem to be in the lead.

AAPL Chart

AAPL data by YCharts

But over the long-term, would you bet on Team Soros or Team Buffett?

MONEY stocks

WATCH: How to Make Better Investing Decisions

T. Rowe Price Chairman Brian Rogers how to be like Warren Buffett and avoid information overload.

MONEY ETFs

Invest Like Warren Buffett—Or at Least Like He Did Two Months Ago

A new ETF seeks to mimic the best ideas of billionaires like Warren Buffett and Carl Icahn based on their public holdings. Trouble is, the fund can't copy them in real time.

Mom-and-pop investors hoping to emulate the investment savvy of Wall Street’s wealthiest like Warren Buffett and Carl Icahn will have a new option on Friday when the latest low-cost exchange-traded fund tracking the stock picks of big-name investors begins trading.

The Direxion iBillionaire ETF, set to trade under the ticker “IBLN,” is the latest in a handful of similar ETFs that have come to market in recent years, all packaging the holdings disclosed quarterly by top investment managers into instruments that are more accessible to Main Street investors.

“It democratizes a lot of the information that very wealthy institutional investors have had for a long time,” said Brian Jacobs, president of Direxion Investments, the ETF provider that has partnered with index creator iBillionaire.

At $65 for every $10,000 invested, fees for the new iBillionaire ETF are far lower than the $200 that would be charged by the typical billionaire-run hedge fund, which would also tack on performance fees.

To be sure, the iBillionaire ETF, like the similar Global X Guru ETF launched in 2012, focuses only on the long portion of these billionaire portfolios and does not include day-to-day active management or any shorting of stocks. Furthermore, the practicalities of pulling investment ideas from the quarterly reports filed by these large investors means that the investment ideas often lag by at least 45 days.

The new ETF is based on an index created in November by startup firm iBillionaire. The fund and its underlying index include the 30 top U.S. companies in which a pool of selected billionaire investors have invested the most assets, based on the so-called 13F disclosures the investors must file quarterly with the U.S. Securities and Exchange commission. Top holdings in the index right now include Apple, Micron Technology and Priceline, with about a third of its portfolio in technology stocks.

“Billionaires are more bullish on technology” right now, said Raul Moreno, chief executive officer and co-founder of iBillionaire. “You can see that by their allocation and their strategies.”

The ETF is similar to the GURU ETF and AlphaClone Alternative Alpha ETF, which both launched in 2012. While they had both beat the benchmark S&P 500 index with stellar performances in 2013, they have been more lackluster this year, with GURU up 0.6 percent and ALFA up 0.3%, compared to the S&P 500, up 4.5% through Thursday’s close.

So far, these funds have a niche following – The GURU ETF has amassed about $499 million in assets, while the ALFA ETF has amassed $79 million in assets. So the billionaires being copied need not worry about losing clients to them, said Ben Johnson, an analyst with research firm Morningstar.

For a related story, see:

Inside Warren Buffett’s Brain

MONEY Investing

Use This Trick to Beat Your Friends at Fantasy Football

Minnesota Vikings running back Adrian Peterson
Jeff Hanisch/USA Today Sports—Reuters

The start of the football season is close and fantasy football drafts have begun. Here's why thinking like a long-term investor can ruin your season.

Last November, one National Football League running back had a particularly good day.

Strong, agile, and quick, this player absolutely tore apart the Atlanta Falcons defense on Nov. 17 to the tune of 163 rushing yards and three touchdowns. Fantasy football owners fortunate to have him on their rosters were awarded almost 35 points from his performance alone—more than a third of the total usually needed to win a whole game.

So who was this guy? Future Hall of Famer Adrian Peterson? The Philadelphia Eagles buoyant halfback LeSean McCoy? Jim Brown? No, no, and of course not. He was an undrafted second-year player out of Western Kentucky named Bobby Rainey. Who, you ask? Exactly. On that same day Peterson himself, perhaps the greatest running back since Jim Brown, ran for 100 fewer yards than Rainey and never touched the end zone en route to a pedestrian 8.5 fantasy points.

It’s hard not to look for a lesson in this episode. And for someone like me, immersed in the investing world, the inclination is to draw a parallel to value investing, the discipline made famous by Warren Buffett. Value investing involves looking for companies that the market does not fully appreciate in hopes that, over time, they will outperform expectations and send the stocks soaring.

But as the fantasy football season gets under way, with millions of fans around the country drafting players over the next few weeks, I’m here to tell you that a Buffett-like approach to fantasy football probably won’t lead to glory.

Why not? Well, to start, value-focused buy-and-hold investing is all about ignoring short-term market fluctuations and sticking with your investment philosophy over the long-haul. Coca-Cola THE COCA COLA CO. KO 0.2162% has a bad quarter? Johnson & Johnson JOHNSON & JOHNSON JNJ 0.7576% delivered poor earnings-per-share growth? No matter. Value investors often see these rough patches as buying opportunities. And one of the foundational principles of value investing is that no investor can consistently predict exactly when to buy this stock or trade that one. When investors do engage in this perilous behavior, they generally end up losing money.

That ethos, however, falls flat when it comes to fantasy football. For one thing, there is no long-term in fantasy football. The season only lasts 17 weeks, which means you have only 17 chances to maximize your total scoring output. While one or two days of poor returns won’t hurt your portfolio, one or two weeks of fantasy football failure could ruin your season. Most leagues have around 10 teams, and, in order to make the playoffs, you’ll usually need seven wins. So if one of your players isn’t performing well, or hasn’t reached his full potential, you don’t have the time to wait.

In other words, don’t be scared to grab onto a hot player until he cools off. For instance, take another look at Peterson and Rainey. Going into the 2013 season, ESPN ranked Peterson the top fantasy football player to draft. Bobby Rainey is not Adrian Peterson. For his career, Rainey only has 566 rushing yards. Peterson has 10,115.

Nevertheless, Rainey was the superior running back over the last seven weeks of the 2013 NFL season. Using the NFL.com scoring system, Rainey earned 79.3 points from week 11 to 17, while Peterson (due in part to injury) only scored 54.8. Even if you take out Rainey’s career day against the Falcons, the two running backs scored pretty much the same number of points.

This isn’t an isolated example, either. Two weeks earlier, Nick Foles, who began the season as the Philadelphia Eagles second-string quarterback, threw for seven touchdowns and garnered 45.2 points for his fantasy owners. Foles would go on to accumulate a total of almost 260 points for the season (more than superstars Tom Brady, Ben Rothlisberger, and Matt Ryan) despite starting in only 11 of 16 games.

In fact, last season, 15 different players scored the most points in a given week (Peyton Manning and Drew Brees each did it twice). Of those 15 players, not one was listed in the top five on ESPN’s pre-season best fantasy football players list. Brady never scored the most points in any one week, for example, but Bears back-up quarterback Josh McCown did, in week 14.

In short, buying the football equivalent of Coca-Cola shares (one of Buffett’s most beloved and long-held stocks) and hanging on through thick and thin can be a losing game.

I learned this lesson the hard way, having drafted Buffalo Bill running back C.J. Spiller with my first pick last season. Ranked the 7th best player by ESPN going into last season, Spiller scored 3.5, 11.7, 3, and 7.7 over the first four weeks. Unwilling to give up on such a high pick, however, I kept him in my starting lineup for most of the season. I ended up in the bottom of my league and learned a valuable lesson in sunk cost theory.

Of course finding seven weeks of Rainey, or spotting the next Foles off the waiver wire, is difficult. Some up-and-comers are just flashes in the pan and will deliver worse returns than your first-round pick. But when this season’s Foles takes off, don’t be surprised. If you play fantasy football you must learn to embrace the shooting star—and if that star burns out, find another.

MONEY Autos

WATCH: Secret Shopper at Cadillac Dealership Turns Out to Be Warren Buffett

Buffett was so pleased he sent a letter to GM CEO Mary Barra to compliment the service his daughter received at an Omaha Cadillac dealership.

MONEY Kids and Money

10 Celebs (Besides Sting) Who Cut Their Kids Out of their Wills

The former Police frontman made headlines when he said his kids won't get trust funds; these other millionaires and billionaires have also decided that their offspring won't inherit 100%.

Musician Sting
Sting doesn’t want his money to be “albatrosses” around his kids’ necks. Carlo Allegri—Reuters

So much for fields of gold. Looks like the six children of pop singer Sting won’t be getting much out of their old man, whose estimated worth has been placed at around $300 million.

The 62-year-old musician didn’t put this message in a bottle: He told the press. In an interview published this past weekend in England’s Mail on Sunday newspaper, Sting—f.k.a. Gordon Sumner—explained that he wasn’t planning on leaving any trust funds for his progeny. “I told them there won’t be much money left because we are spending it,” the paper reported him saying.

Beyond explaining that much of his money is already committed, the former Police frontman also said he wouldn’t want an inheritance to be “albatrosses round their necks.”

“Obviously, if they were in trouble I would help them,” he added. “But I’ve never really had to do that. They have the work ethic that makes them want to succeed on their own merit.”

He’s not the only celebrity who has decided against giving his entire fortune to his kids. Below are 10 other boldface names who’ve either said they’ll write their kids out of their wills or give them only a small slice of their very big pies. (Many of these folks are disinheriting their kids for humanitarian reasons.)

Of course, you don’t have to have mega-bucks to be concerned about how your kids will handle an inheritance. A fairly recent survey from WealthCounsel found that 35% of people are crafting their estate plans to avoid mismanagement of money by their heirs. But if that’s your worry, keep in mind that there are things you can do to ensure that your kid doesn’t squander your hard-earned funds.

  • Bill Gates

    Bill Gates
    Bill Gates Lucas Jackson—Reuters

    Estimated net worth: $78.6 billion

    On a Reddit “Ask Me Anything,” the Microsoft founder said that he thinks leaving his kids massive amounts of money would be no favor to them. Inspired by Warren Buffett, he plans to leave the vast majority of his fortune to charity—he has his own, The Bill & Melinda Gates Foundation. With Buffett, he has has encouraged other billionaires to give away their wealth.

  • Warren Buffett

    Investor Warren Buffett
    Warren Buffett Lucas Jackson—Reuters

    Estimated net worth: $65.1 billion

    The Berkshire Hathaway boss man hasn’t been shy about his distaste for leaving an inheritance to his family members. “I’m not an enthusiast for dynastic wealth, particularly when 6 billion others have much poorer hands than we do in life,” he reportedly said at a 2006 event following his announcement to donate the vast majority of his fortune. Since then, Buffett has pledged to give away a full 99% of his money to charity, and has encouraged other billionaires to give away at least 50% of their wealth through The Giving Pledge.

  • Michael Bloomberg

    140623_FF_Sting_Bloomberg
    Michael Bloomberg Carlo Allegri—Reuters

    Estimated net worth: $34 billion

    The former Mayor of New York City, who made his fortune as owner of the financial information company that bears his name and who has two daughters in their 30s, signed Buffett’s and Gates’s Giving Pledge. In his letter, he said, “If you want to do something for your children and show how much you love them, the single best thing—by far—is to support organizations that will create a better world for them and their children.” The Bloomberg Philanthropic Foundation donates to various causes, ranging from health care to literacy.

  • Pierre Omdiyar

    EBay founder and chairman Pierre Omidyar
    Pierre Omidyar Tim Shaffer—Reuters

    Estimated net worth: $7.6 billion

    The eBay founder and father of three stated in 2001 that he and his wife would give away the vast majority of their wealth during their lives. “We have more money than our family will ever need,” he has written. “There’s no need to hold onto it when it can be put to use today, to help solve some of the world’s most intractable problems.” He and his wife started the Humanity United Foundation which supports anti-slavery nonprofits.

  • George Lucas

    Director George Lucas
    George Lucas Jean-Paul Pelissier—Reuters

    Estimated net worth: $4.9 billion

    After selling the Star Wars franchise to Disney for $4.5 billion in 2012, George Lucas—father to four—said that the proceeds from the sale would be donated towards improving education. That echoed his commitment to give up the majority of his wealth in his 2012 Giving Pledge letter: “As long as I have the resources at my disposal, I will seek to raise the bar for future generations of students of all ages.”

  • Ted Turner

    Turner Enterprises Inc. Chairman Ted Turner
    Ted Turner Phil McCarten—Reuters

    Estimated net worth: $2.2 billion

    In 1990, Turner set up the Turner Foundation, which gives grants on environmental causes, as a family foundation so that his children could also be involved in charitable work. He then launched the United Nations Foundation with an initial pledge of $1 billion back in 1997. The media mogul writes, “At the time of my death, virtually all my wealth will have gone to charity.”

  • Simon Cowell

    Judge Simon Cowell
    Simon Cowell Mario Anzuoni—Reuters

    Estimated net worth: $500 million

    Last year, the X Factor judge and music mogul, who has a 16-month-old son, told the press that he doesn’t believe in passing on wealth from one generation to another. Rather, he plans to leave his money to charity, likely benefiting “kids and dogs.”

  • Kevin O’Leary

    Television personality and businessman Kevin O'Leary
    Kevin O'Leary Gus Ruelas—Reuters

    Estimated net worth: $300 million

    The Canadian businessman and investor, known for being a judge on the ABC series Shark Tank, said in an interview that he isn’t planning on passing any wealth on to his kids. “If you don’t start out your life with the fear of not being able to feed yourself and your family, then what motivates you to go get a job?” he said. “Fear motivated me, and it will motivate them.” He said that once they’re educated, he’ll kick his kids out of the nest, though he says he will set up generation-skipping trusts for his grandkids and great grandkids.

  • Jackie Chan

    Actor Jackie Chan
    Jackie Chan Eric Gaillard—Reuters

    Estimated net worth: $140 million

    The 60-year-old actor has said that he will leave his wealth to charity, and none of it to his son. “He can make his own money,” he reportedly told the press. Chan is a UNICEF Goodwill Ambassador, campaigns against animal abuse and started the Jackie Chan Charitable Foundation, which supports education and disaster relief.

  • Nigella Lawson

    Nigella Lawson
    Nigella Lawson Stefan Wermuth—Reuters

    Estimated net worth: $15 million

    The celebrity chef, who divorced advertising tycoon Charles Saatchi last year, reportedly told the British magazine My Weekly that once her kids finish college, they will have to work and support themselves. “I am determined that my children should have no financial security,” she was quoted as saying. “It ruins people not having to earn money.” But she denies that they’ll be cut out of her will entirely, saying she has no plans to leave them destitute and starving.

MONEY Retirement

Eco Disaster: Lessons from Greenpeace’s Currency Bet Gone Bad

The global peace and sustainability nonprofit lost a bundle betting on currencies. Here's what you can learn from the mistake.

Superstars from Tiger Woods to Warren Buffett tell us the secret to their success is keeping it simple. So why would a donor-dependent, globally recognized nonprofit take a macro-economic flyer on which way currencies will move?

More important: What can the disastrous Greenpeace International bet on the direction of the euro tell us about how we handle our own financial matters? Greenpeace, which is quite good at promoting peace and sustainability, is really bad at macro analysis. Sometime last year the organization lost $5.2 million—more than 6% of its annual budget—when it bet wrongly against a rising euro.

This large loss came to light only this week, and it’s too soon to know its full effect. The organization says a financial pro on its staff overstepped and has been fired, and that the loss will not lead to a penny being cut from its causes. Still, it’s hard to believe that at least some donors won’t bristle and hold back donations. The consequences promise to go beyond simple embarrassment.

One lesson here is that currency speculation is a tricky business and best left to hedge fund managers like George Soros. If you must engage in currency bets alone, do so with only a small fraction of your savings and through straightforward international government bond funds. These pay interest in local currency and thus represent a foreign exchange bet. You might also consider a currency ETF from leaders CurrencyShares and WisdomTree.

The bigger lesson, though, is that it really does pay to keep things simple when investing. As Buffett writes in this year’s annual letter to shareholders:

You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

Complexity is all around us. Exotic mortgages sunk millions of homeowners in the Great Recession. Unimaginably arcane financial derivatives contributed to the demise of Lehman Bros. and downfall of Bear Stearns, among other investment banks, during the financial collapse. Even bankers didn’t know quite what they were doing—not unlike the hapless, rogue finance staffer making a wrong-way bet on the euro for Greenpeace.

Individuals can make things as difficult or as easy as they want when they save and invest. Annuities are especially hot right now. Many people shy away from them because they believe all of them to be complex, and many others end up in the wrong type of annuity (and many other insurance products) because so many truly are complex. Yet for most people just looking to lock up guaranteed lifetime income, the venerable immediate or deferred immediate annuity are a sound and simple option.

Likewise, you can prospect for the hottest stock funds, only to be disappointed once you plunk down your dollars and see them eaten away by lackluster returns and high expenses—or you can choose low-fee diversified stock index funds, or maybe a target-date mutual fund, sleep well, and check back in just once a year to rebalance. Why layer chance on top of investment risk? You are good at something else, not macroeconomic analysis.

Reports suggest that the wayward Greenpeace employee was not nest feathering but trying to do the right thing for the future of the organization. Still, it went bad—even for someone in finance. As with many endeavors, when it comes to money, better to do as Buffett says and just keep it simple.

MONEY Saving

Cheapskate of the Downton Abbey Scene: British Baroness’s Frugal Living Guide

140613_EM_Baroness_1
Downtown Abbey ©Carnival Film and Television Limited —©Carnival Film and Television Limited for MASTERPIECE

Yes, even wealthy aristocrats can be total cheapskates. And proud of it!

The July 2014 issue of the British society magazine Tatler has several interesting reads aimed at the upper crust. The articles carry such provocative titles as “Would You Take Your Son to a Prostitute? The Ins-and-Outs of Upper-Class Sex Education” and “How the Middle Classes Ruined Everything.”

Another story also seems to have the aristocratic set in mind, yet it’s getting quite a lot of attention from us schlubs who ruined everything. “How to Run a Stately Home on a Budget” is essentially a frugal living guide from Baroness Rawlings, the 75-year-old owner of a 13-bedroom, 38-acre country estate in Norfolk, currently on the market for around $10.5 million. The baroness’s money-saving tips, which include reusing everything from napkins to bread crust to newspaper and never throwing anything away, have been featured in a host of British publications, including The Telegraph, Express, and Daily Mail.

Lady Rawlings is a strong proponent of growing one’s own fruit, bargain hunting at auctions and on eBay, and leaving warm water in the tub after bathing (it will warm the room at no extra charge). She also takes issue with the common practice of throwing away “horrid little bars” of soap after they’ve been used by guests. “I give my guests a fresh bar,” she said. “But I reuse it afterwards. And it ends up in drawers and cupboards to keep moths away.”

While it may make news that someone so wealthy is simultaneously so frugal, Lady Rawlings is hardly the only person of means to be an unabashed tightwad. Fellow countrywoman the Queen Mother was supposedly too cheap to buy a TV for her Scottish castle, and she refused to replace raincoats that were nearly 30 years old. The frugal tendencies of Queen Elizabeth II and Prince Charles have also occasionally been on display, especially during the tough recession years, when buffets replaced banquets (the horror!).

Some of America’s super rich are also renowned for their penny-pinching habits—most famously, Warren Buffett, who lives a unfancy life in Omaha, Neb., in the home he bought in 1958 for $31,500. This is the man who is CEO of the fourth-ranking company on the Fortune 500. Dick Yuengling, Jr., the owner of Yuengling, the oldest American-owned brewer, is another very wealthy character who refuses to give up his cheapskate ways; he’s been known to drive a 2002 Taurus (bought used) and reuse Styrofoam cups.

The author Thomas J. Stanley has long chronicled the habits of the wealthy, and while the huddled masses may assume rich folks live wildly extravagant, spend-spend-spend lives, the truth is often just the opposite. In one of his surveys from a few years ago, Stanley found out that 75% of millionaires pay less than $20 for a bottle of wine, and 4 in 10 prefer wine that’s $10 or under.

Other studies have found that affluent people tend to use coupons more than those in poverty, and that rich people don’t buy on impulse and prefer quality over prestige in products, among other somewhat surprising habits.

But should these frugal, value-oriented habits really come as a surprise? A prudent, disciplined, savvy approach likely helped these well-off individuals gain their wealth. And without a prudent, disciplined, savvy approach to spending, even the richest folks out there could cease being rich. At some point.

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