Investment Wisdom from Warren Buffett’s Latest Shareholder Letter

Each year the shareholder letter written by Warren Buffett’s for his company, Berkshire Hathaway is highly anticipated. The latest Forbes Rich list has named him as the 4th richest person in the world. When he speaks about markets and investing – everyone listens.

The latest letter released last Saturday has the usual update on Berkshire’s major investments but later on he gets to the real gold. The Oracle of Omaha as he is known, goes on to provide “Some Thoughts About Investing”.

Someone said to me once “why would I take notice of what Buffett says? It’s not relevant to me because he has so much money it doesn’t matter”. Well every investor will be wiser for reading these pieces of Buffett wisdom – in his own words:

  • “Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no. “
  • “If you .. focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. “
  • “Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.”
  • “Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”)”

And this one is my absolute favourite:

  • “The main danger is that the timid or beginning investor will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur. (Remember the late Barton Biggs’ observation: “A bull market is like sex. It feels best just before it ends.”) The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never to sell when the news is bad and stocks are well off their highs. Following those rules, the “know-nothing” investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better long- term results than the knowledgeable professional who is blind to even a single weakness.”

You can read the full letter here.

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