Learning Economics! What Does Investment Guru Warren Buffett Think of NISA?
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What does Warren Buffett think of NISA?
Using Buffett’s holdings as a reference, we will examine advice and checkpoints for individual investors when selecting stocks for long-term investments such as the new NISA.
Warren Buffett’s investment strategy is extremely compatible with long-term investment in the new NISA (Growth Investment Quota), where you can receive capital gains and dividends tax-free.
We have organized advice and checkpoints for individual investors when selecting stocks, which can be learned from Buffett’s holdings (Apple, Coca-Cola, American Express, Japan’s five major trading companies, etc.).
Buffett-style advice for individual investors
Tips for applying Buffett-style investment methods to the new NISA.
Avoid swallowing whole or copying completely
Buffett (Berkshire Hathaway) has a level of financial power that is on a different scale from individuals, and he may sell stocks for tax purposes or portfolio adjustments.
Also, the portfolio reported as an institutional investor is “past data.”
Avoid buying just because “Buffett is buying” without thinking it through sufficiently.
Cultivate “dividend growth stocks that can be held forever” one share at a time
If you hold stocks like Coca-Cola (KO) long-term in the new NISA, which not only see stock price appreciation but also repeat “dividend increases,”
you will complete a “dividend money machine” where the tax-free dividends you receive increase every year relative to the principal.
A combination of “broad index” + “individual blue-chip stocks”
Buffett himself has publicly stated that “for the average investor, a monthly investment in an S&P 500 index fund is the best option.”
The most reproducible method is to use the S&P 500 or All Country World Index as a foundation in the “Accumulation Investment Quota” of the new NISA, and add a little bit of Buffett-style individual stocks in the “Growth Investment Quota.”
5 stock selection checkpoints that individual investors should use
When selecting individual stocks (US stocks/Japanese stocks) for the new NISA, check whether they meet the following conditions.
《Checklist / Buffett’s perspective/criteria / Indicators and numerical guidelines for individual investors to confirm》
① Economic Moat (Competitive Advantage)
Does it have brand power or a high market share (pricing power) that prevents customers from leaving even if prices are raised?
Is the operating profit margin clearly higher than that of competitors? (e.g., stably maintaining 15% or more).
② Efficiency of Earning (ROE)
How efficiently is the profit generated using the capital entrusted by shareholders?
Use an ROE (Return on Equity) of 15% or more as a guideline (10% or more for Japanese stocks).
③ Shareholder Returns (Dividends and Share Buybacks)
Is the earned profit being properly returned to shareholders? Is the company active in share buybacks?
Consecutive dividend increases or no dividend cuts over the past 5-10 years (stocks with few histories of dividend cuts).
④ Sound Financials (Low Debt)
Is the financial structure robust enough to survive even if a recession or interest rate hike occurs?
Is the equity ratio high, or is there not too much interest-bearing debt? (Is operating cash flow consistently in the black?).
⑤ Circle of Competence (Understanding of the Business)
Is it a business where you can explain “how they make money” in one minute?
Can you be certain that the demand for products and services used in daily life will not disappear in 10 years?
Practice: Specific examples of stock categories to target with the new NISA
Based on Buffett’s portfolio philosophy, the image of stocks suitable for long-term holding in the new NISA is as follows.
US Stocks (Consecutive dividend increases & strong brands)
Coca-Cola (KO) and Procter & Gamble (PG): Daily necessities that are resistant to economic fluctuations.
Apple (AAPL): Overwhelming customer loyalty and shareholder returns through stock buybacks.
Japanese Stocks (High dividends, undervalued, trading companies, etc.)
Mitsubishi Corporation (8058) and Itochu Corporation (8001): Diversified high-dividend stocks that Buffett also holds in large quantities.
NTT (9432) and KDDI (9433): Stable communication infrastructure and a strong track record of dividends.
Checklist for buying: Don’t forget value investing (margin of safety)
No matter how wonderful a company is, buying when the market is in a frenzy and prices are excessively high (bubble state) will lower your long-term returns.
Utilizing indicators: Look at PER (Price-to-Earnings Ratio) and PBR (Price-to-Book Ratio) to check if they are too expensive compared to historical averages or industry peers.
Time diversification: Even when buying with the new NISA, you can reduce the risk of buying at a high price by dividing your funds and adding to your holdings periodically rather than investing all at once.
[Disclaimer]
This article summarizes the author’s personal research and analysis and does not recommend the purchase or sale of any specific financial products or stocks.
Trading financial products, including stock investments, involves risks such as price fluctuation risk, exchange rate risk, and performance fluctuation risk, and there is a possibility that the investment principal may be lost.
The information in this article is based on materials considered reliable at the time of writing, but its accuracy, completeness, and timeliness are not guaranteed.
Please make final investment decisions based on your own objectives, financial situation, and risk tolerance, and at your own responsibility.
Please note in advance that the author cannot be held responsible for any losses incurred through the use of the information in this article.
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