Warren Buffett, known as the "Oracle of Omaha" and one of the most successful investors in the world, may also be the most studied and emulated investor alive. If imitation is the most sincere form of flattery, Mr. Buffett has a lot to feel good about, as investors around the globe have tried to copy Buffett's investment strategies in an attempt to enjoy even a fraction of the type of wealth attributed to his investing prowess. (This esteemed investor rarely changes his long-term investing strategy, no matter what the market does. Check out Warren Buffett's Bear Market Maneuvers.)

TUTORIAL: Ratio Analysis

Who are the Copycats?
Buffett's investing aptitude and corresponding wealth are attractive and inspirational to a variety of investors. All types of investors, including individual and institutional, attempt to follow Buffett's lead. One website that provides details on the portfolios of the "pros" is www.tickerspy.com. Investors can track the pros' investments, and create either hypothetical or actual investment portfolios of their own that shadow pros like Buffett. This particular website shows that over 5250 members currently are tracking Buffett's portfolio, some of whom have adopted Buffett's portfolio in its entirety while others share only a few holdings.

Copycats Do Well, In Theory …
According to a joint study entitled "Imitation is the Sincerest Form of Flattery: Warren Buffett and Berkshire Hathaway" by Professors Gerald Martin of American University Kogod School of Business and John Puthenpurackal of the University of Nevada, investors could have earned statistically high annual returns if they purchased the same stocks as Buffett. This is despite the delay between the time when Buffett would have made the investments, and the time a copycat investor would have been made privy to the information through regulatory filings.

The 2008 study contends that over the past three decades, buying the same stocks as Buffett would have delivered returns that were nearly double those of the Standard & Poor's (S&P) Index. The study concludes that "an investor who mimicked the investments from 1976 to 2006 after they were publicly disclosed in regulatory filings would experience statistically and economically significant positive abnormal returns…" This should be good news for copycats who could expect to do quite well shadowing Buffet's investment decisions, even with a delay. (They don't call him "The Oracle" for nothing. Learn how Buffett comes up with his winning picks. See Think Like Warren Buffett.)

… And Sometimes in Reality
Despite the study's findings that investors can achieve higher-than-average returns by following in Buffett's investing footsteps, the reality is that many investors, whether individual or institutional, do not have the financial ability to risk the amount of money that would be required to own all of Buffett's holdings, even in small position sizes. Without spreading the risk through a well-diversified portfolio such as Buffett's, and instead cherry-picking a few of the stocks, any expectancy for particular returns would be lost.

It should be noted that Buffett believes in avoiding over-diversification – or putting all of one's eggs in too many baskets – which can be just as detrimental as too little diversification. In addition, Buffett's strategy involves buy-and-hold investing. Some of his positions were opened decades ago. Buffett first purchased American Express, for example, in 1964, and has continued to add to his position over the years. The investment today has an unrealized gain of nearly $4 billion.

Not all investors can hold positions for such an extended time, either because they simply started investing too late, or they take a big enough loss that they close the position. (Buffett's "Rip van Winkle" approach has served him well. Read on to learn more. Check out Warren Buffett's Best Buys.)

This in no way implies that copycat investors do not or cannot do well when making the same or similar investments as Warren Buffet, or by simply following some of his strategies, regardless of the chosen stock positions. Even if an investor chooses an entirely different portfolio, he or she could benefit by adhering to Buffett's techniques, including the right amount of analysis, Buffett's well-known decree to invest in what you know, or his tactic to "be fearful when others are greedy and greedy when others are fearful."

TUTORIAL: Behavioral Finance

The Bottom Line
If you go to amazon.com and search for "Warren Buffett," no less than 50 books appear either written by Buffett, or with his name in the title. These writings examine Buffett's strategies, business acumen, investment habits, quotations, wit and wisdom. Buffet and his investing techniques are constantly in the spotlight and are studied, judged, praised, evaluated and, of course, copied.

Related Articles
  1. Mutual Funds & ETFs

    4 Mutual Funds Warren Buffet Would Buy

    Learn about four mutual funds Warren Buffett would invest and recommend to his trustee, and discover detailed analysis of these mutual funds.
  2. Stock Analysis

    Markets Are Tanking: Time to Buy Like Buffett

    Learn about three value stocks Warren Buffett holds in his portfolio. See how Buffett uses market declines to find good deals on stocks.
  3. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  4. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  5. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  6. Bonds & Fixed Income

    High Yield Bond Investing 101

    Taking on high-yield bond investments requires a thorough investigation. Here are looking the fundamentals.
  7. Retirement

    How Robo-Advisors Can Help You and Your Portfolio

    Robo-advisors can add a layer of affordable help and insight to most people's portfolio management efforts, especially as the market continues to mature.
  8. Investing

    Procter & Gamble Restructures, Sheds 100 Brands

    All businesses face adversity, and Procter & Gamble is no exception. We take a look at recent developments affecting this global giant.
  9. Professionals

    4 Ways Companies Can Relieve Workplace Stress

    Workplace stress can cost companies tons of money in lost productivity and absenteeism. Some of that is out of their control, but often they are the cause.
  10. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

    Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability.
  1. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  2. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  3. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  4. What fees do financial advisors charge?

    Financial advisors who operate as fee-only planners charge a percentage, usually 1 to 2%, of a client's net assets. For a ... Read Full Answer >>
  5. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  6. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!