Warren Buffett: A Practical Understanding of Financial Literacy Extended to Managing Investments

Abstract

2020 has been a time of unprecedented change. Financial markets and consumer confidence have collapsed. The unemployment rate has reached double digits; the United States appears headed into a recession. Financial planning is in more demand as individuals and financial markets react to the COVID-19 pandemic.

The increased demand highlights financial literacy concerns around managing investments. Since investment financial decision making can be a complex web with multiple factors, industry practitioners take various approaches to it. Often, people involved in the market make irrational decisions that violate sound judgment and basic economic investment principles. Therefore, financial advisors need to become leaders in adopting new research into practice that can advance financial literacy knowledge.

Warren Buffett offers unconventional success to the fundamental approach to managing investments. Despite his success and large following in the investment world, Buffett’s approaches have not been passed to Americans. In this article, we use a thematic qualitative study to analyze Buffett’s approaches to managing investments by examining 11 years of his comments via the Warren Buffett Archive. Our analysis yields eight critical findings that are well-suited for industry, practitioners, and investors to make better, more informed investing decisions; two findings are uncommon approaches to managing investments.

Keywords: Warren Buffett, financial literacy, thematic analysis, qualitative data analysis, Warren Buffett archive

JEL Classification: D14, D81, G11, P46