As we continue our exploration of owner earnings and what they mean to us, we’ll be discussing the impact inflation has on our investing practice. This week we’re also talking about Buffett’s solutions for “little guy” investors and how we can set ourselves apart from others through our investing education.

How does inflation affect our investing?

  • Inflation is an unavoidable action initiated by devaluing the dollar.
  • Inflation over time makes investing even more important.
    • Since inflation reduces the value of our dollar, we need to make our money work for us.
  • It’s important that we consider inflation when investing if currency, since the devaluation of the dollar comes from the government.
  • We must think of inflation when examining owner earnings to determine whether or not a business will produce cash.
    • Does the company have a competitive advantage?

    • Buffett’s thoughts:

  • If an investor does not want to spend the time to research a company prior to buying, that investor should simply buy the S&P500 index and continue to do so.
    • While Buffett says that this will create returns, it’s nothing like the returns possible when an investor does their own research.
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