Buffett, Fama and the Folly of ‘Portfolio-Building’: What Fidelity Gets Wrong

Fidelity recently published a guide titled “How to Build an Investment Portfolio”.

It’s well-meaning, glossy, and very British in its restraint - the sort of prose designed to make you feel sensible while quietly selling you something.

But if Warren Buffett and Eugene Fama were marking it, one would call it “naïve marketing,” the other “statistically irrelevant.”

Let’s break down what they’d say and why it matters.

1. “Anyone can build a portfolio with a little guidance."

Buffett would chuckle: “A little guidance? Most professionals can’t even build one properly.”

He’d remind you that investing is simple but not easy - and that the illusion of simplicity often breeds overconfidence.

His advice? Focus on a few great businesses or low-cost index funds, and spend the rest of your time living your life.

Fama would be blunter: “If by ‘build’ you mean ‘design to outperform,’ forget it.”

He’d argue that markets already price in all known information, and most “guidance” just leads to costly underperformance.

2. “Know what you’re investing for.”

Both men would nod - briefly.

Buffett would add: if your “goal” is retirement, stop thinking like a gambler. Own productive assets for decades. Fama would say: once your goal is clear, stop fiddling. Set your risk tolerance, buy a global index, and let compounding do the rest.

Fidelity’s implication that you can “build to your goals” by tweaking allocations every few months would make both men groan.

3. “Consider your risk appetite and time horizon.”

Buffett hates the word risk as the industry uses it.

“Risk isn’t volatility,” he’d growl. “Risk is permanent loss of capital.” He’d rather own a volatile Coca-Cola than a calm but dying conglomerate.

Fama would go the other way - volatility is the risk you’re compensated for.

But he’d reject the notion that you can adjust or predict it. He’d say the best proxy for managing risk is diversification - across thousands of securities, cheaply. Either way, Fidelity’s psychometric “risk questionnaires” satisfy regulators, not results.

4. “Don’t forget the world around you - macro trends and global events.”

Here Buffett would roll his eyes.

He’s famously said he ignores macro forecasts because economists have predicted eleven of the last five recessions. Focus on companies with durable moats, he’d say, not newspaper headlines.

Fama would go further: macro timing doesn’t work. Every piece of public information is already priced in.

Trying to adjust portfolios to “the world around you” is, in his view, the purest form of noise.

5. “Consider your ISAs, pensions, and other assets.”

Buffett would approve of thinking holistically but warn against mistaking structure for strategy.

Tax wrappers don’t make a bad investment good.

And Fama would nod - costs, taxes, and diversification matter, but that’s it.

Their combined advice: use your ISA for low-cost, diversified exposure and stop chasing shiny new wrappers or funds.

6. “Ready to take the plunge? Use tools and low-cost funds.”

Buffett would bristle at the word tool.

He’d argue that too many investors hide behind dashboards instead of reading balance sheets. “Your best tool,” he’d say, “is temperament.”

Fama would agree with Fidelity’s emphasis on cost but reject the subtle nudge toward “risk-based fund selection.”

He’d call it disguised active management - an expensive illusion of control.

7. The disclaimers.

Buffett would smirk: “If you need that many disclaimers, maybe you’re not telling the full truth.”

Fama would sigh: “They’re necessary, because people keep believing they can beat randomness.”

Both would agree the best disclaimer of all is this: “You probably can’t do better than the market, but you can do worse - expensively.”

The Bottom Line

Fidelity’s guide is fine if you’re new and nervous. But if you genuinely want to build wealth, listen to the men who’ve actually proven their methods.

• Buffett’s truth: own great assets, avoid noise, and don’t confuse motion for progress.

• Fama’s truth: accept that markets are efficient, costs kill returns, and discipline beats brilliance.

Between them lies a single principle that no glossy brochure will tell you:

The less you fiddle, the richer you’ll probably get.

For my own stress-tested approach to investing smarter - without the fairy tales -visit www.alpeshpatel.com/shares. Disclaimer: This article is for educational purposes only and is not financial advice or a recommendation to buy or sell any investment. Investments can go down as well as up, and you may not get back the amount invested. Always do your own research or seek advice from a regulated financial professional. Alpesh Patel OBE www.campaignforamillion.com