10 Timeless Lessons From Warren Buffett's Favourite Investor

Let’s start off this edition of the newsletter with a quick quiz.

Who was Warren Buffett’s favourite investor?

Uh, duh Nelson. I know this one. So does everyone else on the planet. Warren Buffett’s favourite investor is himself.

Okay, sure. We’ll accept that answer. I think we’d also accept Benjamin Graham or even Warren’s father Howard as his favourites. Both men had a massive influence on a young, impressionable Buffett. We also can’t forget about Charlie Munger, since he also had a lot of influence on a much younger Buffett.

Today I’m going to profile an investor that Buffett liked for decades, a man who was quietly an investing pioneer. He also put up terrific returns for an extremely long period of time, and was around for so long that he had a relationship with Buffett’s father — yet still lived long enough to almost see the 21st century.

When asked about this investor over the years, Buffett gave him his highest compliments.

“(He) has the best long-term investment record of anyone in America. If there ever was a hall of fame for investment advisors, he’d be among the first ten in it.” Buffett also said that this man was “one of his heroes” and “if anyone can get (him) to talk to them, they should listen carefully. I’d advise that.”

That man is Phil Carret (rhymes with hurray), and he might be the best investor you’ve never heard of. He founded the Pioneer Fund, one of the world’s first mutual funds, back in 1928. He managed it for 55 years, amassing a 13% CAGR over that span. That’s enough to turn an initial $10,000 investment into something worth $8M — although I’ll be among the first to admit that compound interest did a lot of the heavy lifting there.

I’m a big believer that pretty good investment results over long periods of time make any investor a happy camper. Carret did one better — he achieved excellent results over a long time period.

Let’s dive into 10 of Carret’s top lessons for investors, timeless lessons that can help most anyone.

The first five

The more I read about Phil Carret the more I like the guy. Like Buffett, or Munger, or so many other greats, he has this uncanny ability to condense an awful lot of wisdom into a sentence or two — great stuff that almost always gets discounted because it doesn’t sound like much.

This is one of my biggest pet peeves when it comes to investing, actually. We constantly search for some new piece of wisdom or some new way of thinking when a perfectly cromulent way is just sitting there, waiting to be executed. We think we need some edge when the “edge” is keep doing a simple strategy over long periods of time.

Which brings me to Carret’s first piece of wisdom:

The most important thing in investing is to use common sense. If it’s not a simple concept, I leave it alone.

Sure, I write up these long pieces of analysis each and every week when I take a closer look at a stock, but the bull thesis can usually be boiled down into a sentence or two.

H&R Block’s (NYSE:HRB) bull thesis can be summed up in the following short paragraph:

Dominant player in its niche is trading at below average valuation with a much higher than normal dividend yield. Consistently repurchases its own shares, which helps it grow earnings per share. Nice balance sheet.

There’s definitely more I could mention, but why bother? That covers about 90% of it. It’s a common sense thesis, and I think there’s huge value in that.

I don’t think people [should] buy stock on the basis of complicated mathematical equations. If your research is accurate and you have a good gut feeling about it, you should go with that decision.

By the way, thanks to the excellent Kingswell newsletter for putting together a bunch of Phil Carret quotes in one place. I’m trying to read more newsletters rather than tweets in 2026, and Kingswell is one of the best. Highly recommended.

You’ll see a common theme in just about everything Carret says — and that’s going with simple, common sense when you invest. As Buffett once said, there’s no reason to jump over a six-foot bar when you can simply step over a one-foot one.

Which brings me to another mistake I see a lot of investors make. A lot of us — including me for a time — figure the more complicated a thesis is, the more valuable it becomes. It’s almost as if they think you get bonus points for degree of difficulty or something. People who are really into finance are often the ones most guilty of this. They can’t help it; they’ve acquired specialized knowledge and can’t wait to show it off.

The Pareto Principle comes into play here. I firmly believe that 20% of your research will produce 80% of results. As long as you get the big things right, the rest has a way of falling into place.

“More fortunes are made by sitting on good securities for years at a time than by active trading.”

This one is interesting. You’ll note that Carret is advocating a long-term approach here, but it isn’t a buy-and-hold-forever approach. He says to sit on good securities for “years” at a time.

It’s an approach that is getting harder and harder to do. Social media has warped our attention spans and created a “what have you done for me lately” world, especially in investing. Nobody has any patience anymore.

“It’s extremely difficult to figure out when to sell anything. So I’d rather have the stock taken away from me in a merger or a buyout. It’s much easier.”

I love this quote because I agree with it wholeheartedly. My view is the average investor doesn’t realize just how difficult being a good seller really is. They’ll sell something based on gut feel or some other flimsy reason. They’ll then put their newfound cash into something new and never ponder the situation ever again.

A good investor does the opposite. They’ll sell and then audit the decision a few times. Was it effective in helping them achieve their goals? Or would they have been better off to keep the original?

In 2012 I thought I was a genius for selling my Intertape Polymer shares for three times more than I paid for them. I paid around $2, sold a bunch for around $7. Eight years later the stock was acquired for $40.

Whoops.

“To make 10% consistently is a great achievement. Very few people achieve it.”

My hurdle rate has been 10% for years now. Basically, I’m looking for opportunities in the market where I can achieve at least a 10% annual return.

This means I’m happy to invest in a situation where a stock yields 5% and I think can grow earnings by 5%. That’s the recipe for a 10% total return over time. Any multiple expansion is a bonus.

Will I screw up and make mistakes? Of course! But so far the winners have more than made fun of the losers. I believe my portfolio is setup nicely to continue that success, too. For every Allied Property REIT (TSX:AP.un), which I got wrong and recently sold, there’s a Capital Power (TSX:CPX), or a Royal Bank (TSX:RY), or even a DRI Healthcare (TSX:DRT.un) — all of which are up more than 100% since I started buying.

Intermission

I’m also one half of the DIY Wealth Canada podcast, a show by DIY investors for DIY investors. We discuss all sorts of interesting stuff of interest for all Canadian do-it-yourselfers — with a good mix of dividend investing content as well.

Feel free to give us a follow on Spotify, YouTube, or wherever else you get your pods.

Okay, back to Phil Carret.

The final five

Let’s pivot to more specific pieces of advice Carret had, rather than on the general practice of investing. The first was definitely influenced by him being active during The Great Depression.

“My #1 rule is never borrow money. I violated it two or three times. I had a margin call in 1924 and I swore I’d never have another. I came close two or three times.”

I think every investor has been tempted to borrow money at some point. I know I’ve sure done it, although only once to buy assets on the stock market. That was in March, 2020, when I dipped into my leverage for the first and only time.

It worked out for me. I didn’t go crazy and I maximized my chances of success by borrowing less than 20% of my portfolio’s value. Still, it’s probably not something I’ll do again. The older I get, the more I go into defense mode.

It’s not easy to resist that temptation. Both Interactive Brokers and Wealthsimple offer attractive margin rates. The interest is tax deductible, too. And when done right, it can really supercharge your returns. Hell, even though it was his number one rule, Carret still violated it. Smart people go broke all. the. time. by borrowing too much, or doing so exactly when they shouldn’t.

Here’s a helpful guide on when it might be a decent time to borrow money to invest.

“Have reasonable humility. Don’t go way out on a limb. Theoretically, you make money by leverage — but, long-term, that’s bad. Only borrow long-term on mortgages.”

We already talked about leverage, so let’s take a moment and talk about humility.

Back when I was trying to grow this newsletter, I tooted my own horn a little bit. I highlighted my big winners to try and point out to y’all why you should listen to me.

It always felt a little weird, like I was roleplaying as someone else. And so, a few months ago, I just kind of stopped trying. These days I share things that work for me, or research on individual stocks, or whatever I decide to write about. If it brings value to y’all, great. And if not? Feel free to hit the unsubscribe button. No hard feelings.

I have little interest in being the smartest person on the internet. Even the thought of an argument exhausts me. I just want to invest and then go live my life. Hopefully I add some value along the way.

“You can determine something by the tone of the annual report. If the management is always much more optimistic than the results would justify, leave it alone. If the managers sound mildly pessimistic and the results are better than management seems to indicate, it’s a good buy.”

I have to admit I don’t put much emphasis on this, but I think I’ll start going forward. It’s a super interesting way of looking at things, and it’s not very hard to look back to see a pattern.

“Don’t worry too much [about your stocks]. If you buy them cheap enough, they watch themselves.”

Okay, I snuck one last investing one in there, mostly because it’s another point I agree strongly with.

There’s really no need to deeply analyze your stocks every quarter. You barely need to read the earnings report. As long as you’ve made a good pick in the first place, quarterly reports are noise. They’re nothing more than an opportunity to add when Mr. Market freaks out.

As long as the underlying business continues to get better — or has the potential to get better — then everything else is mostly noise. Be patient and give your stocks time to perform. And if they don’t and it’s obvious you’ve made a mistake, take your licks and move on. Trust me, it’ll be okay.

“I like to work, so I have no plans to retire. I expect they’ll carry me out feet first.”

I’ve long loved the concept of Selfish Employment, a job you work because you get a lot out of it.

For a while, this newsletter was exactly that for me. But it’s a bit of a solitary existence, so I’m going to try something new for a while. If I enjoy it, then I’ll keep at it. And if not? Then I won’t.

(Don’t worry y’all, the newsletter isn’t going anywhere. I still enjoy it. But I did cut out parts that I didn’t like, including posting on Twitter.)

For Carret, that thing he loved was professionally investing. For you it might be something else. The point is to find that thing, and then never ever let go.

And if you don’t find that thing? Then you’d better work like hell to become independent.

Remember, we have a comment section now. If you’d like to let me know your thoughts, please use that!