Warren Buffett, Who Considers Himself A "So-So Investor," Says This Is His Secret Formula.

Markets are rising on the heels of a dismal week — the worst since December for the S&P 500 SPX and the Nasdaq Composite COMP.

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Despite a great start to the year, February is also appearing to be a loser. That's because the Fed is rethinking how high it will raise interest rates in light of recent solid statistics and persistently rising inflation.

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And some pearls of wisdom from one of the most well-respected investors in the world may have come just in time as Wall Street experts turn silent and Morgan Stanley is mentioned in investor death zone rumors.

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Warren Buffett gives a bone to us ordinary mortals by devoting some space to what he hasn't gotten right in his annual letter to Berkshire Hathaway BRK BRK shareholders, which is reportedly one of his shortest letters ever at 4,455 words.

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"In 58 years of managing Berkshire, most of my capital-allocation choices have been merely passable. Occasionally, I've made poor decisions that have been saved by a lot of good fortune. (Remember our escapes from near-disasters at USAir and Salomon? I definitely do.)," Buffett stated.

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According to him, "our satisfactory results have been the consequence of around a dozen truly good selections — that would be approximately one every five years — and a sometimes-forgotten advantage that benefits long-term investors like Berkshire."

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The benefits of long-term investing and the "secret sauce" of the conglomerate's success were then discussed by Buffett. He talked about Coca-Cola KO, one of his long-term holdings, and mentioned that in August 1994, Berkshire finished a seven-year acquisition of those 400 million shares.

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"The overall cost came to $1.3 billion, which was a significant number at Berkshire at the time. We received a $75 million cash dividend from Coke KO in 1994. The dividend rose to $704 million by 2022. Every year, growth took place; it was as predictable as birthdays. The only thing Charlie [Munger] and I had to do was cash the quarterly dividend checks from Coke. We anticipate that those checks will almost certainly increase," he said.

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Buffett said that American Express AXP, whose annual dividends have increased from $41 million to $302 million, is now valued at $22 billion while his Coca-Cola stock was worth $25 billion by the end of 2022. According to him, each stake now represents around 5% of Berkshire's net worth, which is similar to how it was weighted in the past.

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The Sage of Omaha then considered what would have occurred if he had invested money in a comparable asset that had simply retained its original value, say $1.3 billion into a "high-grade 30-year bond," claiming that would have resulted in unchanged $80 million of annual income — a pittance for Berkshire.

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The investment lesson is that as the flowers blossom, the importance of the weeds diminishes. Over time, a small number of winners can have a huge impact. And absolutely, starting young and living into your 90s both benefit," added Buffett.

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Investors should take note of the fact that Berkshire's top five portfolio holdings have been kept for an average of 17 years, according to Callie Cox, an investment analyst at eToro. Want to succeed Warren Buffett? Hang on there a bit longer," she tweeted.

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"Buffett is very outspoken about his belief that time is a strategic advantage. Investing is sometimes compared to planting an oak tree for many of us. You plant your seeds with the knowledge that it will be years before you see any sprouts since growing a tree takes time. As you can see, the stock market has been a rare instance of a phenomenon that grows more definite over time, she said in a blog post earlier this month.

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While it's not the most popular opinion these days, Cox pointed out that a hypothetical, no-fee S&P 500 fund holder would have made roughly 7% a year, rather than losing money, for any 20-year period since 1950. Do the math: if you invest for 20 years at a 7% annual return rate, your initial investment will nearly treble.

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And investors who are frozen by inaction should keep in mind that the S&P 500 has returned an average of 8% per year since then, despite experiencing 11 economic recessions during the past seven decades, according to Cox.