Lessons Learned
If you are highly successful in a particular role for an extended period of time, you learn a lot of lessons along the way.
Some lessons are learned the hard way through failure. Those tend to be the most memorable. Others are learned through the application of skills and knowledge acquired along the way. Those are less memorable but equally effective.
This past weekend, a very experienced long-term investor announced he will be stepping away from day-to-day decision-making after 60 years of humble yet staggering success.
Warren Buffett’s discipline is admirable. In 1965 he agreed to sell his shares in a struggling textile company (Berkshire) back to the company for $11.50 per share, but the company changed the deal at the last minute and offered him $11.375 per share. Not taking these financial shenanigans lightly, he opted not to close the deal and instead committed to buying as many additional shares as he could to take over the company. Needless to say, things have turned out alright for him.
In honor of Warren Buffett’s announcement this past weekend, here are some of the lessons I have learned from him over the years in his own words:
“Investing is not a game where a guy with the 160 IQ beats the guy with the 130 IQ . . . Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
“Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkable accommodating fellow named Mr. Market who is your partner in private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his. Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him. Mr. Market has another endearing characteristic: he doesn’t mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you. But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up someday in a particularly foolish mood, you are free to either ignore him or take advantage of him, but it will be disastrous if you fall under his influence.”
“Be fearful when others are greedy. Be greedy when others are fearful.”
“When investing, pessimism is your friend, euphoria the enemy.”
“Approval is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re-examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”
“If you mix politics with your investment decisions, you’re making a big mistake.”
“The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.”
“The stock market has a very efficient way of transferring wealth from the impatient to the patient.”
“We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.”
“We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
Quote of the week: See above.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Stock investing includes risks, including fluctuating prices and loss of principal.
Past performance is not guarantee of future results. All indices are unmanaged and can’t be invested in directly. The modern design of the S&P 500 stock index was first launched in1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.
Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
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