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Warren Buffett’s investing mistakes—and what to learn from them




Each year, in a widely read annual letter to shareholders, Berkshire Hathaway chairman Warren Buffett shares financial highlights at the firm, explanations of his investment philosophies and pearls of wisdom accumulated over his 92 years.

Each year, investors come back hoping to glean something from the “Oracle of Omaha” and his massively successful career as a money manager. There was plenty of that to be had in the 2022 version of the letter, which published on Saturday. But Buffett was quick to point out his shortcomings as well.

“Over the years, I have made many mistakes. Consequently, our extensive collection of businesses currently consists of a few enterprises that have truly extraordinary economics, many that enjoy very good economic characteristics, and a large group that are marginal,” Buffett wrote. “Along the way, other businesses in which I have invested have died, their products unwanted by the public.”


Buffett goes on to write that Berkshire’s results “have been the product of about a dozen truly good decisions” over the course of 58 years.

With respect, it’s likely quite a few more than that. But in the spirit of humility, let’s take a look at three of Buffett’s worst decisions, and what investors can learn from them.

1. Buying Berkshire Hathaway

During a 2010 appearance on CNBC, Buffett called Berkshire Hathaway “the dumbest stock I ever bought.”

In 1962 Buffett had built a stake in what was then a failing textiles firm, but agreed to sell his stock back to owner Seabury Stanton at $11.50 per share. But when Buffett received the offer letter from Berkshire, the price had changed to $11 3/8.

Feeling chiseled, Buffett sought payback. Instead of selling, he began buying the stock, took control of the company and fired Stanton.

Had he sold, he may have taken the money and invested in the insurance business — a move that he’d eventually make anyway, and one that would launch is business empire. Instead, he had to spend years and resources trying to revive his textile holding.

“I had now committed a major amount of money to a terrible business,” Buffett later said of the purchase. He calculated that the mistake was worth $200 billion.

It’s unlikely you’ll be in position to buy a company out of spite, but you may find yourself making investing decisions based on emotions, whether it’s exuberance over a risky investment you think could make you rich or fear that a falling market could ruin your portfolio.

In each case, it’s important to take a step back and realize that investing is a long-term game, not one that’s played in the day-to-day fluctuations of the market.

Being a good investor “is about teaching yourself not to let your emotions become your portfolio’s worst enemy,” says Sam Stovall, chief investment strategist at CFRA.

2. A ‘world record’ mistake: Buying Dexter Shoe

Buffett bought American shoe company Dexter Shoe in 1993, overlooking that the firm was facing heat from foreign manufacturers. “What I had assessed as a durable competitive advantage vanished within a few years,” Buffett wrote in his 2007 letter to shareholders.

Compounding the mistake, Buffett paid $443 million for the company in Berkshire stock rather than cash. Today, the shares would be worth north of $12 billion.

“As a financial disaster, this one deserves a spot in the Guinness Book of World Records,” Buffett wrote in his 2014 shareholder letter.

You may not have stock in your own lucrative company to trade, but you do likely have a core portfolio of low-cost, well-diversified funds. Diverting a major portion of your assets from your core investments to take a chance on an unknown quantity can be a dangerous move, investing pros say.

If your bet goes south, you’ll not only lose money on your investment, but you’ll miss out on the gains you would have enjoyed by sticking to the plan.

That’s not to say you can never take a chance on an investment you like. But such a holding “should never be a dominant force in your portfolio,” says Kenneth Lamont, senior manager research analyst for passive strategies at Morningstar. If you’re going to invest in something like, say, a trendy thematic ETF, “you shouldn’t be putting in money you couldn’t essentially afford to lose.”

3. ‘Dawdling’ before selling Tesco

By the end of 2012, Berkshire owned 415 million shares of UK grocer Tesco — an investment of $2.3 billion. Over the next year, Buffett wrote in his 2014 shareholder letter, he began to “sour” on the firm and sold 114 million shares.

Buffett has made his reputation (and billions of dollars) as an investor by buying great companies and holding on over the long term. The problem was, Tesco was slowly revealing itself to be a not-so-great company.

“During 2014, Tesco’s problems worsened by the month. The company’s market share fell, its margins contracted and accounting problems surfaced,” Buffett wrote. “In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.”

Berkshire eventually sold its remaining interest in the firm and took a $444 million loss.

“An attentive investor, I’m embarrassed to report, would have sold Tesco shares earlier. I made a big mistake with this investment by dawdling,” says Buffett.

But even attentive investors can find it difficult to sell struggling stocks they once liked. A cognitive bias known as “anchoring” is one that just about every investor struggles with, says Scott Nations, president of investment volatility analytics firm NationsShares and author of “The Anxious Investor.”

“If you bought an investment at X price, and now it’s worth 20% less, it’s tough to disabuse yourself of the notion that it’s worth X,” he says.

Instead of reevaluating the investment and possibly selling, you tend to hang on and, well, dawdle. What Nations suggests doing if you hold such an investment is actually exactly what Buffett did: Sell a chunk of your holding and “see if that doesn’t help you think more clearly.”

By mentally resetting the value of your failing investment, you can take a more clear-eyed view of its long-term prospects. In other words, Buffett made the right move here. Just not fast enough for his liking.


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Manitobans lose more than $700K from investment fraud, securities commission finds



More than 60 Manitobans were victims of investment fraud recently, as the number of fraudulent investment websites continues to grow, the Manitoba Securities Commission (MSC) said.

“Their lives are forever altered,” said Jason Roy, a senior investigator with the MSC.

An ongoing cryptocurrency investigation by the MSC, a division of the Manitoba Financial Services Agency (MFSA), found that the victims were scammed by 34 different fraudulent investment websites, all of which promote cryptocurrency or Forex (foreign exchange market) trading, according to an MFSA news release on Wednesday.

About 62 Manitobans lost a total of $710,000, with victims losing anywhere between $320 and $206,000, according to the statement.


“The individuals that are running these scams have become more sophisticated,” Roy said in a phone interview. They are “designed in order to trick you.”

Roy said the number of online fraudulent investment sites has been dramatically increasing over the last few years.

In 2022, investment fraud caused the highest levels of reported fraud victim losses, especially cryptocurrency fraud, according to the RCMP.

“There is certainly legitimate cryptocurrency … opportunities out there, but there are far more fraudulent cryptocurrency scamsters and websites popping up all the time,” Ainsley Cunningham, a spokesperson for MSC, said in a phone interview.

The scammers, who operate offshore but say they have offices in Canada, targeted their victims on social media, usually through fake news articles or fake celebrity endorsements.

They then got victims to invest a small amount of money – around $350, Cunningham said – and would show them fake profits, enticing them to invest more. Scammers also ask victims to convert their money to cryptocurrency, making the funds nearly impossible to recover.

“They really like to get people hooked in,” Cunningham said. “You’ll sort of think, ‘Wow, I’m making a lot of money here.'”

If victims try to withdraw their supposed profit, scammers will ignore or block them, or they might tell victims to invest more in order to make withdrawals.

“Once it’s gone, it’s gone,” Roy said.

Anger, embarrassment, frustration

Cunningham said it’s heartbreaking to tell people they are victims of fraud.

“It’s so hard to hear the stories. They’re very emotional conversations,” she said.

The victims ranged in age between early-20s to late-60s. Some lost money intended for their children or retirement savings, she said.

“There’s anger, there’s embarrassment, frustration. Some people, there’s a little bit of hope, thinking, ‘Well, maybe I still can get my money back.'”

Cunningham said she tells those who invested a small amount to look at it as an “expensive education.”

For others, the consequences are more serious and might even include having to return to work.

“It cost them a lot,” she said. “It’s painful to hear how it’s affecting their family life, their relationships.”

Cunningham said there’s thousands of fraudulent websites to watch out for.

“While we’re aware of these 34, we know that there’s many, many more websites out there,” she said.

Many sites will scam as many people as possible, shut down once they get caught, and then will pop up again under another site or company, Cunningham said.

The Manitoba Securities Commission is warning the public not to be fooled by scam artists who are working abroad in boiler rooms dedicated to frauding Manitobans. The commission says some victims have lost as much as $600,000.

There are a few ways to make sure an investment company is legitimate, Cunningham and Roy said.

People can visit, search the name of the company or individual in question, and find out whether the person or company is registered to do business in Manitoba or Canada.

Manitobans can also call MSC’s anti-fraud line to ask questions about a possible fraud or to report one.

“It’s important to recognize it, and it’s also important to report it,” Roy said.

“If we don’t know about it, you know, there’s nothing we can do. We can’t get the message out.”


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4 Indian investors explain how their investment strategy has changed since 2021



India has long harbored a strong entrepreneurial spirit, and it’s not uncommon to see people leaving jobs to set up their own businesses. A hallmark of that spirit is quite visible these days in the country’s flourishing startup ecosystem, which has expanded rapidly in the past few years, to say the least.

However, the global slowdown has impacted startups’ growth in the country, just like everywhere else in the world. After a blockbuster year for venture capital funding in 2021, the flow of capital to Indian startups seemed like it would buck global trends in early 2022, but dried up in the second half of 2022.

Nevertheless, investors are optimistic about their prospects in the country and feel that the global slowdown is helping founders focus more on building and strengthening their core business.

“While this is a tough environment for companies, we see it as an opportunity to pause, take stock and consolidate,” said GV Ravishankar, managing director of Sequoia India.


“Founders are becoming a lot more focused on building and strengthening their core business and are getting sharper about capital allocation and driving improvements in the economic shape of their businesses,” he said.

“Working with uncertainty is very much the nature of the beast.” Roopan Aulakh, managing director, Pi Ventures

All the investors we spoke to agreed that in order to make the best of the situation, startups should conserve runway and prioritize growth if they can afford to do so.

For Ashutosh Sharma, head of India investments at Prosus Ventures, it is paramount for startups to ensure their existence at this time. “This allows startups to take a step back and focus on internal processes, business model evolution and organizational issues [ … ] These factors, once fixed, will lead to more organic product-market fit, which will lead to growth alongside economics.”

India’s startup landscape has changed immensely over the past couple of years, so to better understand how Indian investors are approaching investments, the regulations they are looking out for, which sectors currently have their attention and how they prefer to be approached, we spoke with a few active investors:

GV Ravishankar, managing director, Sequoia India

After a year of hot investments, India saw a significant drop in VC funding in 2022, and this year is likely to be similar. How has your investment strategy changed?

After more than a 12-year bull run for tech in the global markets supported by low interest rates, since the beginning of 2022, we have witnessed a significant slowdown in capital flows. This has resulted in a difficult environment from a capital availability perspective in India and other emerging markets.

While this is a tough environment for companies, we see it as an opportunity to pause, take stock and consolidate. Founders are becoming a lot more focused on building and strengthening their core business and are getting sharper about capital allocation and driving improvements in the economic shape of their businesses.

So it is actually a healthy period and it will result in high-quality businesses coming out of this market in the next couple of years.

What advice would you give your portfolio startups to continue growing at this time?

Focus on growth with good economics and don’t “buy” growth, as that will come with poor economics and hence is not sustainable. Focus on the core business and deprioritize experimental investments.

Double down on the core product if capital is available, as there is a chance to pull ahead from competitors in a market like this through the right investments. The current environment can also provide good opportunities to acquire capabilities through M&A at attractive prices if capital is available.

Compared to 2019, what were the most notable investment trends in India in 2022? Do you expect these trends to continue into 2023? Which sectors do you think will emerge as the next big thing by 2025?

There has been continuous innovation over the last several years thanks to more digital adoption and lower data pricing. After COVID, we saw significant uptick in e-commerce, edtech and technology-enabled service delivery across sectors. We also saw fintech pick up as a big theme and supply chains got digitized, including in manufacturing and agriculture.

Our core sectors are software, consumer, consumer internet, fintech and financial services. These remain continued areas of focus for us and constitute 80% of our efforts. Other upcoming sectors are EVs, climate tech, space tech and opportunities from supply chain shifts to India. Today, these are small and emerging sectors, but tomorrow, they could be massive opportunities.

So we are meeting early-stage founders who are building in this space and partnering with startups that are trying to create innovative solutions for some of the challenges faced in these industries.

The 20% of what we do keeps changing every few years because of market trends and tech innovations, but, by and large, the 80% has remained the same for nearly 17 years. Fundamentally, we are looking to partner with founders who are going after large problems in large markets to make a dent in the world. That will always remain the same.

What sets the sectors you are currently investing in apart from others? How do you evaluate the potential of a startup in these sectors before making an investment?

We evaluate a startup by the market they are going after (whether it is large, growing and has profit pools), the team (founder-market fit; why this team) and business model/moats (do they have a better mouse trap and why will they sustain their advantage?).

What qualities do you find most important in a founder when evaluating their potential for success? Conversely, what is a major red flag that would cause you to back off?

One of the most important qualities we look for in founders is their perseverance and grit to go after the problems they’ve set out to solve. From a founder-market fit perspective, we also ask what makes a founder or a founding team best positioned to win in the market, and what are their unique insights into the problem they are solving.

Red flags are linked to failed background checks or if the business metrics represented don’t check out in diligence.

Ashutosh Sharma, head of India investments, Prosus Ventures

After a year of hot investments, India saw a significant drop in VC funding in 2022, and this year is likely to be similar. How has your investment strategy changed?

Given the environment of rate hikes and geopolitical uncertainty, last year, we adopted a more conservative approach, setting the bar much higher for investments. Following that, we shifted our investment focus to smaller ticket sizes, earlier stages and toward companies in the SaaS and B2B domains.


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Some investment firms not adhering to new conflict of interest rules, regulatory review concludes



Some Canadian wealth management firms are not adhering to new conflict-of-interest rules, particularly when selling their own proprietary products, according to a new compliance report by an industry watchdog.

In a report released this week, the New Self-Regulatory Organization of Canada revealed that while a number of investment dealers have implemented strong controls to “identify, disclose and address” conflicts in the best interest of their clients, there are still a “few common weaknesses” involving various aspects of the conflict-of-interest rules that began in 2021.

One such weakness is that solely providing disclosure to a client does not satisfy the rules and investment dealers must implement controls to address the conflict in the client’s best interest.

While the rule applies to any type of conflict – such as third-party compensation, product recommendation, sales incentives – the New SRO review identified specific gaps by investment dealers in controls to address conflicts associated with the sale of proprietary products.


The New SRO is the amalgamation of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).

The new rules, known as client focused reforms or CFRs, came into effect in June, 2021, and were intended to address conflict-of-interest concerns in certain situations – for instance, if an adviser’s compensation is linked to selling an institution’s proprietary products.

But the rule reforms also brought unintended consequences when several of Canada’s largest banks halted sales of third-party investment products from their financial planning arms in 2021. Certain banks shifted to only offering their own proprietary mutual funds, and clients working with financial planners are no longer able to purchase independent funds in their investment portfolios.

Shortly after, both IIROC and the MFDA, along with the Canadian Securities Administrators, launched an industry-wide compliance sweep to determine how the new rules were being implemented by investment firms – including the Big Six banks.

This involves examining conflicts associated with proprietary products and restrictions related to a firm’s product shelf.

In addition to deficiencies with proprietary products, the New SRO also found firms did not always disclose all three components of the conflict of interest to clients: the nature and extent of the conflict; the potential impact and risk that a conflict could pose to the client; and how the conflict of interest has been, or will be, addressed by the investment dealer.

And some investment firms did not adequately document their assessment of conflicts to provide evidence to regulators that they are addressing the conflict in the best interest of the client.

IIROC declined to comment on whether the review included examining the product shelves of bank-owned discount brokerages that have come under scrutiny by the industry for blocking do-it-yourself investors from purchasing low-risk cash exchange-traded funds.

The New SRO said the separate joint report – which will be released at future date – will more provide more details of the “deficiencies” identified across all investment dealers and platforms as well as some best practices observed during the sweep.

The sweep is independent of another review conducted last year by the Ontario Securities Commission on the product offerings of Canada’s largest banks. Ontario Finance Minister Peter Bethlenfalvy launched that review after he had concerns about financial institutions halting sales or “unduly” restricting sales of third-party investment funds.

The OSC submitted recommendations to him on Feb. 28, 2022. The report has not yet been released to the public. Last month, a spokesperson for the Finance Minister told The Globe and Mail that Mr. Bethlenfalvy is still reviewing the OSC’s recommendations, more than a year later.


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