Warren Buffett Just Released a Farewell Letter. It Contains the Most Devastating 4-Word Piece of Investment Advice I've Ever Heard.

I turned 50 years old last week: Living proof that age and maturity don’t always go hand in hand.

I can think of only a few things that have stayed the same over those 50 years. I’ve had red hair the entire time. Washington’s portrait is still on the dollar bill. And, for that entire half-century, Warren Buffett was Chairman of Berkshire Hathaway (BRKB +0.11%) (BRKA -0.04%).

But on Friday — the day after my birthday — Buffett released a farewell letter, announcing he was stepping down from that position, effective immediately. I don’t believe the two events are related.

As usual, though, the “Oracle of Omaha” added some sage wisdom to his letter, including the most devastating four words of investment wisdom I’ve ever heard.

Here’s what he said and what it means for investors.

Buffett picks a final winner

Buffett is nearly twice my age.

“Recently, I celebrated my 96th birthday with family and friends, including one of my great-grandchildren, who had just turned one,” he wrote in his letter. “He’s moving a bit faster than I am these days.”

Buffett then revealed that he was stepping out of the “Chairman” role he’s held since 1970, and into the role of “Chairman Emeritus.” His son Howard Buffett — who has been on Berkshire Hathaway’s board for 33 years — has succeeded him as Chairman.

But then Buffett gave the four devastating words that should be a wake-up call to all investors:

“Father Time always wins.”

On the one hand, Buffett’s statement refers to the inevitability of aging. But those four words also sum up his thoughts about investing.

What it means for investors

Father Time does always win. That’s true both in life and in the stock market.

Buffett’s “buy and hold” strategy used time and compound interest to gradually turn small positions into massive wealth engines. The strategy made him a billionaire and Berkshire a trillion-dollar company.

And he wasn’t shy about proclaiming it, either. “If you aren’t willing to own a stock for ten years,” he said in 1996, “don’t even think about owning it for ten minutes.”

That’s another thing that hasn’t changed in 50 years: the U.S. stock market has always gone up. Since I was born, the S&P 500 has risen 2,100%. But with the compounding power of reinvested dividends, its total return has been 4,530%. No wonder Buffett famously said, “Our favorite holding period is forever.”

Index

S&P 500 Index

Today’s Change

(0.17%) +12.74

Index Level

7,650.50

Key Data Points

Day’s Range

7,610.52 – 7,657.17

52wk Range

6,316.91 – 7,816.70

Buffett doesn’t end his farewell letter with, “Father Time always wins.” Instead, he goes on to say, “[Father Time] has, however, been generous with me. He has given me the opportunity to see Berkshire reach a point where I am more confident than ever about what lies ahead.”

It’s impossible to look at the history of the S&P 500 and not be confident about where the market is headed over the long term. Even with major market crashes like the dot-com bust and the Great Depression, those who stayed invested in stocks still generated incredible returns over time, faring much better on average than those who jumped in and out.

So, even without Buffett in the Chairman’s seat at Berkshire, his advice — and his buy-and-hold philosophy — are still winners, thanks to Father Time.