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Why Warren Buffett doesn’t want you to trade stocks like Warren Buffett

They don’t call him the “Oracle of Omaha” for nothing

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For the first time in the company’s history, Berkshire Hathaway will live stream its annual shareholder meeting on Yahoo Finance on April 30.

Warren Buffett didn’t become a multi-billionaire and grow his company, Berkshire Hathaway (BRK), into a $360 billion behemoth without some serious investing chops.

But if you ask the 85-year-old "Oracle of Omaha" how you might emulate his success in your own portfolio, don’t expect him to show you his play book. Buffett has made one thing clear over the years: the average individual investor would be far better off if they didn’t try to play copy cat.

Investing like Buffett isn’t as simple as running down the list of Berkshire’s holdings and buying up stock in favorites like American Express, AT&T and Costco. This is a man who managed to raise the stock value of Berkshire Hathaway over 1,000,000% between 1964 and 2015, crushing the S&P 500’s meager 2,300% gains over the same time period. Buffett is much more than just a talented stock picker. He’s an unprecedented negotiator with billions of dollars at his disposal, which allows him to strike deals with publicly traded companies that the rest of us would never be privy to.

One recent-ish example is his 2008 deal with General Electric. Struggling to recover from the 2008 market crash, GE tapped Buffett to lead a $12 billion common stock sale. To sweeten the deal, GE let him buy up $3 billion worth of GE shares at a fixed price of $22.25  — no matter what price GE shares were trading at the time — and guaranteed him a 10% dividend. Those kinds of deals just aren’t available to us common folks. We don’t even have a seat at the table.

That’s not to say the rest of us can’t make strategic investments that can set us up for future gains. Buffett has been more than happy to offer his guidance on this matter.

“What most people should do [is] buy a cheap index fund, and slowly dollar cost average into it,” he said at a 2008 speech at  the University of Texas-Austin. “If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.”

Index funds are widely seen as a reliable way for the average investor to get broad exposure to the stock market without taking on too much risk. That’s because these funds are invested in a wide variety of entities, like the Vanguard Total Stock Index Fund, which gives you a piece of the entire U.S. equity market. They can be a good tool for retirement investors looking to beat inflation and protect their savings until they’re ready to retire. But don’t expect to see Buffett-sized gains. They’re almost surely not going to give you the kinds of double-digit returns Berkshire Hathaway shareholders enjoy. The company’s shares saw 11% gains so far this year, compared to a measly 2% return for the S&P 500.

Unless you can devote six to eight hours a week timing the market, there’s no point in trying, he says. “There is nothing wrong with a ‘know nothing’ investor who realizes it,” he has said. “The problem is when you are a ‘know nothing’ investor but you think you know something.”

Buffett recommends two books for beginning investors: the 1949 tome “The Intelligent Investor” by Benjamin Graham and “Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor” by Vanguard founder Jack Bogle.

More wisdom from Buffett:

Buffett's 7 best pieces of investing advice

18 lessons from Buffett on finances, life and finding a job you love

Yahoo Finance Exclusive live stream
Yahoo Finance Exclusive live stream
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