TIME Careers & Workplace

Advice for 20-Somethings From Warren Buffett, Bill Gates and Geniuses

Warren Buffett at Squawk Box interview on May 4, 2015.
Lacy O'Toole—CNBC/NBCU Photo Bank via Getty Images Warren Buffett at Squawk Box interview on May 4, 2015.

"Help your community, help other people"

If you’re young and your career is in its early days, you’ve likely been privy to plenty of career truisms and clichés.

But if “follow your passion,” “give 110%,” and “be true to yourself” just aren’t cutting it for you anymore, perhaps advice like, “don’t work too hard” and “relax” are more up your alley.

These successful people have offered some of the best — and oftentimes unconventional — advice for people in their 20s:

Warren Buffett: Exercise humility and restraint.

In a 2010 interview with Yahoo, Berkshire Hathaway chairman and CEO Warren Buffett said the best advice he ever received was from Berkshire Hathaway board-of-directors member Thomas Murphy. He told Buffett:

“Never forget Warren, you can tell a guy to go to hell tomorrow — you don’t give up the right. So just keep your mouth shut today, and see if you feel the same way tomorrow.”

During this year’s Berkshire Hathaway annual shareholders meeting, Buffett also told a curious seventh-grader that the key to making friends and getting along with coworkers is learning to change your behavior as you mature by emulating those you admire and adopting the qualities they possess.

Maya Angelou: Make your own path.

In her book, “The Best Advice I Ever Got,” Katie Couric quotes author, poet, dancer, actress, and singer Maya Angelou:

My paternal grandmother, Mrs. Annie Henderson, gave me advice that I have used for 65 years. She said, ‘If the world puts you on a road you do not like, if you look ahead and do not want that destination which is being offered and you look behind and you do not want to return to you place of departure, step off the road. Build yourself a new path.’

Richard Branson: Never look back in regret — move on to the next thing.

Richard Branson’s mother taught him that.

“The amount of time people waste dwelling on failures, rather than putting that energy into another project, always amazes me,” The Virgin Group founder and chairman told The Good Entrepreneur. “I have fun running ALL the Virgin businesses — so a setback is never a bad experience, just a learning curve.”

J.K. Rowling: Embrace failure.

J.K. Rowling, author of the best-selling children’s book series “Harry Potter,” knows a lot about achieving success — and failure.

“I don’t think we talk about failure enough,” Rowling recently told Matt Lauer on NBC’s “Today” show. “It would’ve really helped to have someone who had had a measure of success come say to me, ‘You will fail. That’s inevitable. It’s what you do with it.'”

Before Rowling became one of the wealthiest women in the world, she was a single mom living off welfare in the UK. She began writing about her now famous character, the young wizard Harry Potter, in Edinburgh cafes, and received “loads” of rejections from book publishers when she first sent out the manuscript, The Guardian reports.

“An exceptionally short-lived marriage had imploded, and I was jobless, a lone parent, and as poor as it is possible to be in modern Britain, without being homeless … By every usual standard, I was the biggest failure I knew,” Rowling said during a 2008 Harvard University commencement speech.

She went on to say that she considered her early failure a “gift” that was “painfully won,” since she gained valuable knowledge about herself and her relationships through the adversity.

Eric Schmidt: Say yes to more things.

In her book, “The Best Advice I Ever Got,” Katie Couric quotes Google executive chairman Eric Schmidt as advising:

Find a way to say yes to things. Say yes to invitations to a new country, say yes to meet new friends, say yes to learn something new. Yes is how you get your first job, and your next job, and your spouse, and even your kids.”

Marissa Mayer: Pick something and make it great.

In a 2011 interview with the Social Times, current Yahoo president and CEO Marissa Mayer revealed the best advice she ever received:

My friend Andre said to me, ‘You know, Marissa, you’re putting a lot of pressure on yourself to pick the right choice, and I’ve gotta be honest: That’s not what I see here. I see a bunch of good choices, and there’s the one that you pick and make great.’ I think that’s one of the best pieces of advice I’ve ever gotten.

Steve Jobs: Don’t just follow your passion but something larger than yourself.

In a recent Business Insider article, Cal Newport, author of “So Good They Can’t Ignore You,” referenced Steve Jobs biographer Walter Isaacson, who recalled an exchange he had with Jobs shortly before he passed. Jobs reportedly told Isaacson:

Yeah, we’re always talking about following your passion, but we’re all part of the flow of history … you’ve got to put something back into the flow of history that’s going to help your community, help other people … so that 20, 30, 40 years from now … people will say, this person didn’t just have a passion, he cared about making something that other people could benefit from.

Suze Orman: With success comes unhelpful criticism — ignore it.

In a LinkedIn article about the best advice she ever received, motivational speaker, author, and CNBC host Suze Orman wrote that success has often made her a target of nasty criticism “entirely disconnected from facts.” At first these attacks made her angry, but she eventually learned to ignore them.

“A wise teacher from India shared this insight: The elephant keeps walking as the dogs keep barking,” she wrote.

“The sad fact is that we all have to navigate our way around the dogs in our career: external critics, competitors, horrible bosses, or colleagues who undermine. Based on my experience, I would advise you to prepare for the yapping to increase along with your success.”

Bill Gates: Keep things simple.

In a 2009 interview with CNBC, Microsoft cofounder and chairman Bill Gates admired Warren Buffett’s ability to keep things simple.

You look at his calendar, it’s pretty simple. You talk to him about a case where he thinks a business is attractive, and he knows a few basic numbers and facts about it. And [if] it gets less complicated, he feels like then it’s something he’ll choose to invest in. He picks the things that he’s got a model of, a model that really is predictive and that’s going to continue to work over a long-term period. And so his ability to boil things down, to just work on the things that really count, to think through the basics — it’s so amazing that he can do that. It’s a special form of genius.

Arianna Huffington: Don’t work too hard.

In a LinkedIn post last year, The Huffington Post president and editor-in-chief Arianna Huffington revealed that she’s often asked if young people pursuing their dreams should burn the candle at both ends?

“This couldn’t be less true,” she writes. “And for far too long, we have been operating under a collective delusion that burning out is the necessary price for achieving success.”

She says she wishes she could go back and tell her younger self, “Arianna, your performance will actually improve if you can commit to not only working hard but also unplugging, recharging, and renewing yourself.”

Stewart Butterfield: Have an ‘experimental attitude.’

Stewart Butterfield, the cofounder of Flickr and chief executive of Slack, one of the fastest-growing business apps of all time, recently shared his best advice for young people with Adam Bryant of The New York Times:

“Some people will know exactly what they want to do at a very young age, but the odds are low,” he said. “I feel like people in their early- to mid-20s are very earnest. They’re very serious, and they want to feel like they’ve accomplished a lot at a very young age rather than just trying to figure stuff out. So I try to push them toward a more experimental attitude.”

George Stephanopoulos: Relax.

“Almost nothing you’re worried about today will define your tomorrow,” “Good Morning America” coanchor George Stephanopoulos told personal finance website NerdWallet.

“Down the road, don’t be afraid to take a pay cut to follow your passion. But do stash a few bucks in a 401(k) now.”

Maria Malcolm Beck: Remember that you won’t end up where you start.

Marla Malcolm Beck, CEO of Bluemercury, said in an interview with Adam Bryant of The New York Times that she always reminds students that “nobody ends up in the first job they choose out of college, so just find something that is interesting to you, because you tend to excel at things you’re interested in. But just go do it. You have nothing to lose.”

Her other piece of advice: Go into tech. “If you look at all the skill sets companies need, they involve a comfort level with technology,” she told Bryant.

T.J. Miller: Work harder than anyone else around you.

T.J. Miller, comedian and star of HBO’s “Silicon Valley,” told personal finance website NerdWallet this is truly the formula to success. “It worked for me, and I have mediocre talent and a horse jaw.”

Alexa von Tobel: Get up, dress up, and show up.

What Alexa von Tobel, founder and CEO of LearnVest and the author of New York Times bestseller “Financially Fearless,” means is that it’s important to wake up excited for what’s coming, dress the part, and always show up ready to go.

“As a new hire, you will likely find yourself in tons of new situations, and it’s up to you to figure out how to navigate them,” she wrote in an article for Business Insider.

“Remember that your manager is strapped for time, so know when to ask questions. Are you unsure of the objectives for an assignment? Asking her to clarify is crucial, since it’s pretty hard to make the mark if you don’t know where it even lies.

“On the flip side, avoid bombarding your manager with petty questions that could be answered by your peers or a quick Google search.”

Mark Bartels: Map out a timeline for yourself when you start a new job.

“We talk about budgets; we talk about planning your finances; but what a lot of people don’t do is plan out the next 12 to 18 or 24 months of their careers,” StumbleUpon CEO Mark Bartels tells Business Insider.

He says that lack of planning can be costly, both professionally and existentially, while having an agenda provides a metric for evaluating your success.

Hermione Way: Start your own business.

“There has never been an easier time to start a business,” Hermione Way, founder of WayMedia and star of Bravo’s “Start-Ups: Silicon Valley,” told personal finance website NerdWallet.

“There are so many free online tools. Just start, and if you fail you can always go and get a normal job, but you will learn so much along the way it will be a great experience.”

John Chen: Being a ‘superstar’ can hurt your career.

“Most employees think that the best way to show value to their boss and get promoted is to aggressively claim credit and ownership over everything they do,” BlackBerry CEO John Chen wrote in a LinkedIn post earlier this year.

“While it’s important to be recognized for what you do and the value you add, grabbing the glory is going to turn off your coworkers.” It can also turn off your boss, he warns.

“Trying too hard to show you’re a superstar tells me that you only care about what’s best for you, and not the company as a whole.”

Salli Setta: Never eat lunch alone.

Red Lobster president Salli Setta tells Business Insider it’s important to get out from behind your screen at lunchtime because lunch is a prime networking opportunity.

The benefit of always having lunch plans with someone are two-fold: You can get information that will help you “think about your job differently,” and you also get on your companion’s radar.

“It isn’t about saying ‘hi, what are we going to talk about, let’s talk about sports,'” Setta says. “It’s about identifying the object of this lunch in your mind” and going in armed with “a couple of things that you want to ask, and a couple of things you want to share.”

Deepak Chopra: Embrace the wisdom of uncertainty.

In a LinkedIn post last year, Deepak Chopra, popular author and founder of The Chopra Foundation said he wished he embraced the wisdom of uncertainty at a younger age.

“At the outset of my medical career, I had the security of knowing exactly where I was headed,” he wrote. “Yet what I didn’t count on was the uncertainty of life, and what uncertainty can do to a person.”

“If only I knew then, as I know now, that there is wisdom in uncertainty — it opens a door to the unknown, and only from the unknown can life be renewed constantly,” he wrote.

Cynthia Tidwell: Be patient enough to learn, but impatient enough to take risks.

Cynthia Tidwell, CEO of insurance company Royal Neighbors of America, told Business Insider her favorite piece of advice for young people is be patient enough to learn, but impatient enough to take risks. “I encourage taking risks,” she said. “What is the worst thing that can happen? You can go back and do what you were doing before.”

Brian Chesky: Don’t listen to your parents.

Brian Chesky, CEO of Airbnb, said in an interview with The New York Times’ Adam Bryant that recent grads shouldn’t listen to their parents.

“They’re the most important relationships in your life, but you should never take your parents’ career advice, and I’m using parents as a proxy for all the pressures in the world,” he told Bryant. “I also say that whatever career you’re in, assume it’s going to be a massive failure. That way, you’re not making decisions based on success, money and career. You’re only making it based on doing what you love.”

David Melancon: Ask 3 important questions at the end of every interview.

When a hiring manager turns the tables at the end of an interview and asks, “do you have any questions for me?” David Melancon, CEO of btr., a corporate-rankings platform that focuses on holistic performance, says there are three questions far more important for you to ask than what the salary is or what the job requirements are.

The questions are:

1. What qualities will a person in this role need to be successful in your company culture — as an individual and as a worker?

2. What’s the company’s position on education and development, including student-loan reimbursement and tuition assistance?

3. How does the company keep employees excited, innovative, and motivated?

Diane von Furstenberg: Keep it real.

In a recent interview with Adam Bryant of The New York Times, fashion designer Diane von Furstenberg says she has learned that trusting yourself is the key to success.

“In order to trust yourself, you have to have a relationship with yourself,” she told Bryant. “In order to have a relationship with yourself, you have to be hard on yourself, and not be delusional.”

Rick Goings: Be nice to everyone.

Rick Goings, CEO of home-products company Tupperware Brands, which brought in $2.6 billion in revenue last year, shared his favorite pearls of wisdom for young people with Business Insider. One of them was be nice to everyone when you go on a job interview.

“I like to check with the driver, our receptionist, and my assistants on how the candidate interacted with them. How you treat others means the world!”

This article originally appeared on Business Insider

More from Business Insider:

TIME Dairy Queen

Meet the Rogue Dairy Queen That Serves Whatever It Wants

Two-Story Dairy Queen The First To Open In Manhattan
Andrew Burton—Getty Images

Pick up a Polish sausage and a Mr. Maltie

The Dairy Queen in downtown Moorhead, Minn., has that quintessential mid-century look with slanted roof and red and white striped awning. It stands out for more than its retro look. The location serves its own unique mix of items, shunning its corporate overlord and the standard menu fare.

The unique setup is a by-product of a 66-year-old contract, reports the Associated Press. The DQ was set up in 1949, and the deal allows the location to dish out treats long since removed from other DQ menus as well as the owner’s choice of other add-ons.

“If we changed to the new corporate way, virtually all our food items would be gone,” owner Troy DeLeon, told the Associated Press. “The corporate way is everything exactly the same.”

This includes meal items such as barbecue sandwiches and Polish sausages as well as the location’s much-loved frozen treats, with unique toppings (some discontinued by corporate). The favorite dessert items include: the Mr. Maltie, a chocolate malt on a stick; the Monkey Tail, a chocolate-covered frozen banana; and the Chipper Sandwich, a chocolate cookie, vanilla ice-cream sandwich dipped in chocolate.

Dairy Queen is owned by Warren Buffett’s Berkshire Hathaway.

TIME Careers & Workplace

This Is Warren Buffett’s Best Investment Advice

Warren Buffett during an interview in Omaham, Neb. on May 4, 2015.
Nati Harnik—AP Warren Buffett during an interview in Omaham, Neb. on May 4, 2015.

Go all-in on this amazing asset and you will see returns beyond anything you could dream of

Inc. logo

Warren Buffett is considered to be one of the greatest investors that has ever lived and is consistently ranked among the wealthiest people in the world with a net-worth north of $72 billion. He is well known for his commitment to value investing, and when he gives recommendations, people listen.

The other day I came across a quote from him where he was advising people to invest as much as possible in something that everyone has access to, something , he says, in which we can never invest too much.

What is this amazing asset he’s so bullish on?

It’s you.

“Invest in as much of yourself as you can, you are your own biggest asset by far.” — Warren Buffett

You will never get a better return on life than when you truly invest in yourself. Here are some ways to help you make the most of your investment.

Stay healthy on all three planes: mind, body, spirit.

“You only get one mind and one body. And it’s got to last a lifetime. Now, it’s very easy to let them ride for many years. But if you don’t take care of that mind and that body, they’ll be a wreck forty years later, just like the car would be.” — Warren Buffett

It all starts here. You need to be firing on all cylinders, or else you won’t be able to get the most of out your life.

This doesn’t have to be difficult or time consuming. Just be mindful about improving yourself. Here are some simple ways to do it:

  • Mind: read a book (even if it’s just one page a day), journal, come up with ideas.
  • Body: exercise (even if it’s just for 7 minutes), eat good food, drink plenty of water, get a good night’s sleep.
  • Spirit: pray (it doesn’t matter if you’re religious or not) or just says ‘thanks’, be kind to people, write a gratitude list.

Cultivate positive habits and stick to them with a daily routine.

How much better do you feel on the days that you do something good for yourself? Perhaps it’s the days that you exercise or maybe when you are really focused at work. Your days just seem to go smoother, don’t they?

You can have that every day. It’s just a matter of deciding what you want to do and following through with it.

Start small. Decide on one positive habit that you can start doing today, and then do it. Then do it again tomorrow. Once you’ve mastered one habit, you can put that momentum toward building a way to have the best day ever (every single day).

Never stop learning.

One of the greatest secrets to Warren Buffett’s success is that he is continuously learning. Charlie Munger, the vice chairman of Buffett’s Berkshire Hathaway Corporation, once said this about his legendary colleague:

“Warren Buffett has become one hell of a lot better investor since the day I met him, and so have I. If we had been frozen at any given stage, with the knowledge we had, the record would have been much worse than it is. So the game is to keep learning, and I don’t think people are going to keep learning who don’t like the learning process.”

Most people think that real learning ends when school is over but they are selling themselves way short. Life should be about continuous learning, and there are many ways for you to do this:

  • Attend conferences, seminars, and meet-ups.
  • Take a free online course.
  • Talk to people and ask them questions (listen more than you talk).
  • Research something you are interested in.
  • Travel.

Surround yourself with excellence.

“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.” — Warren Buffett

It’s been said that you’re the average of the five people you spend the most time with. In other words, who you spend time with influences the person you become.

Take a look at the people in your life right now and ask yourself these questions:

  • Are they making you better or are they bringing you down?
  • Are they mostly positive or are they typically quite negative?
  • Do you feel better when you are around them or do you feel worse?

If someone is a negative influence on you, then you have to kick them to the curb (or severely limit your time spent with them). This can be very hard when it’s a family member or co-worker, but if you want to become the best version of you, you are going to have to take action.

Spend time getting to know yourself.

“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. so I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.” — Warren Buffett

Your time is extremely valuable and precious. Spend some of it getting to know yourself better. These practices can help you find out who you truly are:

Do what you love to do.

“There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume. Isn’t that a little like saving up sex for your old age?” — Warren Buffett

You only have one life to live, why not live it to the fullest?

Invest as much as you can in yourself starting right now, and you will see returns beyond anything you could dream of.

This post is in partnership with Inc., which offers useful advice, resources and insights to entrepreneurs and business owners. The article above was originally published at Inc.com.

More from Inc.com:

TIME Banking

This Is the Most Valuable Bank In The World

A woman walks past teller machines at a Wells Fargo bank in San Francisco, California.
Robert Galbraith—Reuters Wells Fargo promised to enact new Temporary Leave Underwriting Guidelines and educate their loan officers.

Forget the big investment banks, it's all about the basics here.

Forget those flashy big-name banks that always snag headlines. The title for world’s most valuable bank goes to Wells Fargo & Co.

The San Francisco-based bank recently zoomed past Industrial & Commercial Bank of China as the bank with the largest market value worldwide, reported the Wall Street Journal. Wells Fargo is worth $301.6 billion. That’s $40 billion more than J.P. Morgan Chase and almost $120 more than Citigroup.

As China’s stock market struggles and the relative strength of the U.S. economy continues to grow, it’s been a boon to American banks like Wells Fargo. ICBC and Wells Fargo have continually battled for the global top spot, and Wells Fargo first passed it in value in 2013. But, Chinese banks are facing new growth obstacles as the economy inches along, slowing down their expansion significantly from long-running double-digit growth. ICBC shares have fallen about 19% in the past three months, the WSJ reported.

Wells Fargo’s stock has gained 12.4% so far this year, making it the seventh-largest stock in the Standard & Poor’s 500 index. However, when it comes to the largest U.S. bank by assets, that title is still held by J.P. Morgan.

Wells Fargo’s booming market value is a credit to its relatively simple style of business. It doesn’t rely on subprime loans, complex derivatives or risky trades funded by borrowed money. Instead, it focuses on its core units like consumer lending, banking services and mortgage origination. That straight-forward approach may be why Warren Buffett has long been the bank’s largest shareholder (and one of Fortune’s World’s Most Admired Companies).

READ MORE: The big banks of the Fortune 500 that keep getting bigger.

TIME Warren Buffett

Warren Buffett Donates $2.8 Billion … Again

Berkshire Hathaway Inc. CEO Warren Buffett Interview
Bloomberg—Bloomberg via Getty Images Berkshire Hathaway CEO Warren Buffett is giving away $2.8 billion as part of his annual donation pledge.

Five foundations will benefit from his annual gift

Billionaire investor Warren Buffett is the gift that keeps on giving.

The Berkshire Hathaway CEO on Monday donated $2.8 billion to five foundations as a part of his annual pledge.

Around 20.6 billion shares of Berkshire Hathaway class B stock will be donated to the Bill and Melinda Gates, Susan Thompson Buffett, Sherwood, Howard G. Buffett and NoVo Foundations, the company announced in a statement.

It marks Buffett’s tenth annual gift to charities. Last year, Buffett set a personal philanthropy record when he donated an equivalent $2.8 billion.

Buffett’s donation follows the recent headline-making news by Alwaleed bin Talal. The Saudi Prince said he plans to give away his entire fortune worth $32 billion to philanthropic causes over the next few years.

TIME psychology

How Warren Buffett Keeps Up With Information

Warren Buffett in an interview on May 4, 2015.
Lacy O'Toole—CNBC/NBCU Photo Bank via Getty Images Warren Buffett in an interview on May 4, 2015.

Shane Parrish writes Farnam Street

It's about having filters

A telling excerpt from an interview of Warren Buffett (below) on the value of reading. Seems like he’s taking the opposite approach to Nassim Taleb in some ways.

Interviewer: How do you keep up with all the media and information that goes on in our crazy world and in your world of Berkshire Hathaway? What’s your media routine?

Warren Buffett: I read and read and read. I probably read five to six hours a day. I don’t read as fast now as when I was younger. But I read five daily newspapers. I read a fair number of magazines. I read 10-Ks. I read annual reports. I read a lot of other things, too. I’ve always enjoyed reading. I love reading biographies, for example.

Interviewer: You process information very quickly.

Warren Buffett: I have filters in my mind. If somebody calls me about an investment in a business or an investment in securities, I usually know in two or three minutes whether I have an interest. I don’t waste any time with the ones which I don’t have an interest.

I always worry a little bit about even appearing rude because I can tell very, very, very quickly whether it’s going to be something that will lead to something, or whether it’s a half an hour or an hour or two hours of chatter.

This piece originally appeared on Farnam Street.

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TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY mutual funds

Everything You Need to Know About The Fidelity Contrafund Mutual Fund

William Danoff, vice president of Fidelity Management & Research
Scott Eells—Bloomberg via Getty Images William Danoff has been managing Fidelity's Contrafund for nearly a quarter century.

How this gigantic fund has consistently beaten its peers over the last 5 years.

Fidelity Contrafund isn’t contrarian in the way that you might think. Contrarians are fearless and independent, buying stocks the herd hates. But who on Wall Street dislikes Berkshire Hathaway, Contrafund’s largest holding? Or Apple, its second-largest position?

Yet there’s one counterintuitive thing Will Danoff, the fund’s skipper for 24 years, has accomplished. While big funds often lag, this $110.7 billion portfolio—now larger than Fidelity Magellan was at its peak—has still beaten two-thirds of its peers over the past five years. How much longer can Danoff keep it up?

Money

How It’s Different

Morningstar classifies this portfolio as a large growth stock fund. But Contrafund has some latitude, as exemplified by its big stake (4.7% of assets) in Berkshire Hathaway. The insurance-heavy conglomerate run by Warren Buffett isn’t exactly a high-flying growth stock. Neither is another holding, Wells Fargo, the conservatively run megabank.

Fear not. While Contrafund has an outsize stake in value-oriented financials, it doesn’t stray too far afield. Among its other top holdings are growth stalwarts Facebook and Biogen, and the fund bought Alibaba on its initial public offering. Tech, which is the biggest sector for growth portfolios, represents about 24% of the fund, just a tad below the 25% average for large growth funds.

 

Money

Danoff’s Defensive Moves

What distinguishes Danoff as a manager? He does well when the market doesn’t, and that’s helped the fund over time. Contrafund outperformed large growth funds in the two major bear markets of this century, which has allowed the fund to clobber its peers by 1.6 percentage points a year over the past decade.

Still, “for a contrarian, the most difficult moment is investing in a market that has gone well,” says Jim Lowell, editor of Fidelity Investor. Sure enough, Contrafund has been about average over the past three years. The fund has made some good defensive moves, downshifting from an 8.6% stake in energy in 2011 to 2% now. But don’t expect to see Contrafund among the top gainers when the market soars, Lowell says.

Money

A Question of Size

One big elephant in the room is Contrafund’s elephantine size: It is the second-largest actively managed stock portfolio, behind only American Funds Growth Fund of America. Plus, Danoff has led this fund for nearly a quarter-century, when the average manager tenure is 5½ years.

Fidelity does have a massive staff of analysts. And Danoff “doesn’t exhibit any signs of weariness or burnout,” says Lowell. But there’s no denying this fund is enormous, which means buying small, fast-growing companies won’t do it much good. If you’re okay with just blue-chip names, this is “a fund with a well-proven manager, strong risk-adjusted returns, and low expenses,” says Todd Rosenbluth, director of mutual fund research at S&P Capital IQ.

(Note: Losses are from March 24, 2000, to Oct. 9, 2002, and Oct. 9, 2007, to March 9, 2009. Source: Morningstar)

MONEY Ask the Expert

The Best Way To Buy Stocks Warren Buffett Likes

Investing illustration
Robert A. Di Ieso, Jr.

Q: I’d like information on the “dividend aristocrats” that Warren Buffett has talked about. Should I buy them through a fund or a direct purchase plan? — Sheron Milliner

A: There’s no hard-and-fast rule about what stocks qualify as “dividend aristocrats,” but the moniker typically refers to companies that have consistently paid and raised their dividends — without fail — for at least several consecutive years.

The exact number of years is up for debate. Standard & Poor’s runs several equity indexes that track these types of companies. One benchmark that focuses on S&P 500 companies requires at least 25 consecutive years of dividend increases; a broader-based U.S. index looks for stocks that have boosted their payouts for 20 years or more; and a European version defines a dividend aristocrat as a stock that has boosted its payments for at least 10 straight years.

The dividend itself doesn’t have to be that large either — “it just has to be sustainable,” says Ron Weiner, CEO of investment advisory firm RDM Financial Group. “A company is showing its confidence in growth by increasing dividends as opposed to doing a one-time stock buyback or cash distribution.”

Companies that qualify as aristocrats tend to be value-oriented blue chips — think PepsiCo PEPSICO INC. PEP 0.44% , Johnson & Johnson JOHNSON & JOHNSON JNJ 0.72% , and Walmart WAL-MART STORES INC. WMT 0.18% — as opposed to high-flying newbies.

That said, a company’s place in the court isn’t guaranteed. Banks were for many years dividend aristocrats, but many cut their payouts in the aftermath of the financial crisis.

For that reason – and for the sake of diversification – Weiner’s advice to investors interested in this strategy is to look for an exchange-traded fund (ETF) or mutual fund that focuses on dozens or hundreds of companies with track records for paying and boosting their dividends.

The SPDR S&P Dividend ETF (SDY), for example, limits its universe to stocks that have increased their dividends for 20 consecutive years. Again, this isn’t to say it’s a forgone conclusion that these companies will continue to up their payouts. As Morningstar analyst Michael Rawson notes, because the fund weights its holdings by yield, it tends to favor lower-quality midcaps and value holdings.

Another ETF in this niche, the ProShares S&P 500 Dividend Aristocrats (NOBL), focuses on companies in the index with a 25-year record of dividend increase, but it gives equal weighting to all of its holdings.

It’s important to note that investors looking for income won’t necessarily find the highest yields among this group. Again, the key is consistency, says Weiner. “The point is to find good companies that have demonstrated that they can consistently grow their businesses over time.”

Although Weiner has used passive funds to tap into this group, he thinks active management may have an advantage here. “If something big happens, managers can react faster than an index,” says Weiner, whose firm has invested in the Goldman Sachs Rising Dividend Growth fund.

At the same time the fund sticks with companies that have raised their dividends an average of 10% a year over the last 10 years, its managers look for companies with the wherewithal to continue raising dividends in a meaningful way.

You could put together your own portfolio of dividend aristocrats by using one of the above portfolios as a starting point, but Weiner doesn’t recommend that approach. Even if you did assemble a diverse mix of dividend payers, keeping tabs on these companies is practically a full-time job.

“You can’t just buy and hold, and not pay attention,” says Weiner. “Aristocrats do get overthrown.”

MONEY stocks

These Are Warren Buffett’s Favorite Dividend Stocks

Forbes' 2015 Philanthropy Summit Awards Dinner
Dimitrios Kambouris—Getty Images Warren Buffett speaks during the Forbes' 2015 Philanthropy Summit Awards Dinner on June 3, 2015 in New York City.

The billionaire's own company doesn't pay them out, but it still invests in plenty of other stocks that do.

Warren Buffett loves dividend stocks. While Berkshire Hathaway does not pay any dividends, many of the largest positions in the company’s portfolio are among the most solid dividend stocks on the market, this includes names such as Coca-Cola COCA-COLA COMPANY KO 0.1% , Wells Fargo WELLS FARGO & COMPANY WFC 0.98% , and IBM INTERNATIONAL BUSINESS MACHINES CORP. IBM 0.65% , among several others.

Warren Buffett loves dividend stocks
Going through Berkshire Hathaway’s portfolio, it’s easy to identify many of the most prominent dividend stocks across different sectors in the market. Coca-Cola is one of the most iconic Warren Buffett stocks, and the company has an outstanding track record of dividend growth over the long term: Coca-Cola has increased its dividends in each year over the last 52 years, and the stock pays a dividend yield of 3.3% at current prices.

Wells Fargo is Warren Buffett’s favorite bank, and also the biggest position in Berkshire Hathaway’s portfolio. The company has a simple and low-risk capital allocation policy, which makes it a particularly strong choice for dividend investors looking for sound alternatives in the banking sector.

Wells Fargo had to cut dividends during the financial crisis in 2009, but the company has rapidly compensated investors with growing dividends since then, what was a quarterly payment of $0.05 in 2010 has now turned to 0.375 quarterly, and Wells Fargo is currently paying a 2.7% dividend yield.

Warren Buffett typically stays away from companies in the tech business, but he made a notable exception with IBM. Buffett first invested in Big Blue in 2011, and he has been adding to the position in recent quarters. Due to its brand presence and established relationships with major corporate customers across the world, IBM is a particularly solid play in the tech industry, and management has translated the company’s strengths into growing dividends for investors over the long term.

IBM has paid uninterrupted dividends since 1916, and it has increased payments over the last 20 consecutive years. Dividends have doubled in the last five years, and this includes a generous dividend hike of 18% for 2015. After the latest increase, IBM is paying a dividend yield of 3%.

On dividends and competitive strengths
Dividends can say a lot about the health of a business. In order to distribute consistently growing cash flows to investors, a company has to generate more cash than in needs to reinvest in its operations over time.

This means that companies with outstanding dividend growth are usually those with enough soundness to successfully go through the ups and downs of the business cycle, and they also have the competitive strengths to protect their sales and cash flows from the competition. With this in mind, it’s no wonder why many Warren Buffett stocks are also outstanding dividend payers.

Berkshire Hathaway is a notable exception to the rule, as the company pays no dividends whatsoever. However, this is related to Berkshire’s business model and the amazing investing talent of Warren Buffett. Berkshire is in the business of capital allocation, the company generates far more cash than it needs to reinvest in its operations, but Warren Buffett retains that cash in order to allocate it to different investment opportunities.

For a company like Coca-Cola, or most other businesses in the world for that matter, the right thing to do with excess cash flows is distributing that money to investors. However, investors in Berkshire Hathaway are better served by leaving that money in Buffett’s hands, so the Oracle of Omaha can put it to work and obtain superior returns over time. Berkshire doesn’t pay any dividends, but that’s only because Buffett can put that money to better use, not because the business does not generate enough cash to make dividend distributions.

Dividends convey important information about a company’s fundamental strengths, and Warren Buffett is all about investing in top-quality businesses with undisputed soundness. With this in mind, going for companies with a solid track record of dividend growth could be a smart way to follow Warren Buffett’s guidelines when making investment decisions.

Read next: Warren Buffett Says He Would Never, Ever Do These 3 Things

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MONEY stocks

Millennials Prefer Hot Tech Stocks While Gen Xers Shop for Dividends

Tesla Unveils New Battery System
Kevork Djansezian—Getty Images Elon Musk, CEO of Tesla, with a graphic unveils suite of batteries for homes, businesses, and utilities at the Tesla Design Studio April 30, 2015 in Hawthorne, California.

Among the top picks for young adults aged 34 and younger: Apple, Facebook Inc, Tesla Motors Inc, Alibaba Group Holding Ltd.

It seems America’s youth have found a hero, and he is 84 years old.

For those aged 34 or younger, their No. 2 favorite stock – behind only mighty Apple Inc – is none other than Warren Buffett’s Berkshire Hathaway Inc.

This is according to new data from the brokerage TD Ameritrade, which took a snapshot in May of the individual equity holdings of every one of its retail clients (not including mutual funds and exchange traded funds, which themselves hold baskets of different securities).

When it came to picking individual stocks, the results showed a generational difference. Millennials, who are pegged as tech-obsessed upstarts, favored the stocks of their own time. Aging baby boomers, who are stereotyped as stubbornly set in their ways, and Generation X, which is stuck in the middle, mostly favored what they know best, that is, dividend stocks.

Among the top picks for young adults aged 34 and younger: Apple, which accounts for a whopping 11.7 percent of their equity holdings; Facebook Inc, at 1.9 percent; electric carmaker Tesla Motors Inc (TSLA), at 1.1 percent; and Chinese e-commerce giant Alibaba Group Holding Ltd, at 1.1 percent.

For all those aged 35 years and older, Apple reigns supreme in their portfolios as well, with a share of 9.4 percent. Other popular stocks include General Electric Co, at 1.7 percent; AT&T Inc, at 1.4 percent; and Exxon-Mobil Corp, at 1.4 percent.

No mystery there: Follow the dividend.

“Older clients tend to search for higher yield,” said Nicole Sherrod, TD Ameritrade’s managing director of trading, since dividend-paying stocks provide a steady income stream as boomers start easing into retirement.

“So you see energy companies like Chevron, and healthcare names like Johnson & Johnson, and telecoms like Verizon, all of which they are very familiar with and have been investing in for years.”

For the youngest generation, however, it is all about what is hot now.

“It’s a demographic that is very much into tech, so it’s not shocking that it tends to skew much higher in their portfolios,” said Sherrod.

“Take something like Tesla: It’s something hot that millennials covet, and although they may not have the purchasing power to buy the car yet, they can certainly buy the stock.”

Who Has It Right?

But the underlying question: Do America’s respective generations have their equity mixes right? Or is some rebalancing in order?

To find out, Reuters took the trove of TD Ameritrade data to Patrick O’Shaughnessy, a portfolio manager with Stamford, Connecticut-based O’Shaughnessy Asset Management and author of the book “Millennial Money: How Young Investors Can Build a Fortune.”

His No. 1 concern for both generations: Back off on the Apple, guys. Not because of poor fundamentals, but because of serious overweighting.

“Those Apple percentages are crazy high,” O’Shaughnessy said. “In comparison Apple is around 4 percent of the S&P 500, so that is a huge individual position for both age groups.”

O’Shaughnessy also warns millennials against loading up on the latest sizzling tech stock, say Alibaba, and advises them to look hard at underlying valuations. In many cases price-earnings ratios have shot sky-high, and just do not represent smart buys.

If millennials remain determined to invest in the sector, they should instead look at stodgier tech names like Microsoft Corp, he said. With proven revenue streams, stock buyback programs, and growing dividends, tech’s old guard should prove safer harbor if market storms hit.

O’Shaughnessy’s final tip for investors: Look abroad. Since the U.S. market has “killed every other market for five years,” that likely means many investors are now overweight in American stocks. As a result, bulking up your portfolio with more international names would be wise.

Whether it comes to millennials, or Gen Xers, or boomers, each generation seems to be investing in what it knows. Generally speaking, that is a good thing – and happens to be a favorite principle of Warren Buffett himself.

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