3 ways to invest like Warren Buffett

A cottage industry of asset managers, financial advisors and investment can give you their takes on how to be just like Warren Buffett.

You can skip the circus of wannabes and hear from the Oracle of Omaha directly in his annual letter to Berkshire Hathaway shareholders, which was published Saturday.

You don't have to be a stock-picking whiz to benefit from his success. Buffett has already detailed three ways to emulate him in your retirement portfolio.

The two-fund portfolio

Buffett outlined an investing strategy for ordinary investors in his 2013 annual shareholder letter:

My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.

You can buy U.S. Treasurys directly or invest in a low-cost government bond fund. (Vanguard's short-term government bond index fund charges 0.16 percent annually with a $3,000 minimum investment, or 0.07 percent for the exchange-traded fund version.)

Vanguard offers several S&P funds: a traditional mutual fund that charges 0.16 percent annually with a $3,000 minimum investment or one with a $10,000 minimum and a 0.05 percent annual fee.

"Warren Buffett's investment strategy is a good one for investors and signals that he doesn't believe that most people, including professionals, can beat the market long-term, so just be the market and buy low-cost index funds," said Stephanie Genkin, a certified financial planner in Brooklyn.

Berkshire Hathaway stock

You can share in gains of one of the world's greatest capital allocators by owning stock in Berkshire Hathaway directly.

Buffett's holding company has beaten the total return of the S&P 500 over the past 10 years with an annualized return of 9.1 percent, compared to 7.3 percent for the index.

The Warren Buffett way

For the adventurous (or foolish), you can try your hand at investing in stocks like the master of value investing himself.

Where most investors lose their way in following in Buffett's legendary footsteps is consistency. Even Buffett stumbles from time to time.

"The problem that most people would have investing like Buffett is the time frame. Many of his investments can take years to pan out, and the average investor doesn't have that sort of patience," said George Gagliardi, a CFP and founder of Coromandel Wealth Management in Lexington, Massachusetts.

The key to Buffett's stock-picking success has been his ability to buy when others are fearful.

"During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy."

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• Linda Raschke on Twitter: “So nice when someone sums up timeless guidelines with such a well organized layout”
• Ray Dalio: “The World Has Gone Mad and the System Is Broken.”
• Bill Gross: Cheap is not always cheerful in value investing