- don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it. If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.
- If it’s your game, diversification doesn’t make sense. It’s crazy to put money into your 20th choice rather than your 1st choice. “Lebron James” analogy. If you have Lebron James on your team, don’t take him out of the game just to make room for someone else. If you have a harem of 40 women, you never really get to know any of them well.
- Charlie and I operated mostly with 5 positions. If I were running 50, 100, 200 million, I would have 80% in 5 positions, with 25% for the largest. In 1964 I found a position I was willing to go heavier into, up to 40%. I told investors they could pull their money out. None did. The position was American Express after the Salad Oil Scandal. In 1951 I put the bulk of my net worth into GEICO. Later in 1998, LTCM was in trouble. With the spread between the on-the-run versus off-the-run 30 year Treasury bonds, I would have been willing to put 75% of my portfolio into it. There were various times I would have gone up to 75%, even in the past few years. If it’s your game and you really know your business, you can load up.
On Margin of Safety
- If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you’d need. If you’re driving a truck across a bridge that says it holds 10,000 pounds and you’ve got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, but if it’s over theGrand Canyon, you may feel you want a little larger margin of safety…
- 1997 Berkshire Hathaway Annual Meeting[specific citation needed]
- You leave yourself an enormous margin of safety. You build a bridge that 30,000-pound trucks can go across and then you drive 10,000-pound trucks across it. That is the way I like to go across bridges.
- Financial World, June 13, 1984.
Efficient Market Hypothesis
- I’d be a bum on the street with a tin cup if the markets were always efficient.
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- Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
- It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
- You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else. – Ben Graham
- Our favorite holding period is forever.
- Letter to Berkshire Hathaway shareholders, 1988
- When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.
- Risk comes from not knowing what you’re doing.
- If you don’t know jewelry, know the jeweler.
- If you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes.
- There seems to be some perverse human characteristic that likes to make easy things difficult.
- One’s objective should be to get it right, get it quick, get it out, and get it over… your problem won’t improve with age.
- A public-opinion poll is no substitute for thought.
- In the insurance business, there is no statute of limitation on stupidity.
- If a business does well, the stock eventually follows.
- The most important quality for an investor is temperament, not intellect… You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.
- The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.
- We will only do with your money what we would do with our own.
- Occasionally, a man must rise above principles.
- It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
- Of one thing be certain: if a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.
- When asked how he became so successful in investing, Buffett answered: we read hundreds and hundreds of annual reports every year.
- “I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. “I’m paying $32 billion today for the Coca Cola Company because…” If you can’t answer that question, you shouldn’t buy it. If you can answer that question, and you do it a few times, you’ll make a lot of money.”
- You ought to be able to explain why you’re taking the job you’re taking, why you’re making the investment you’re making, or whatever it may be. And if it can’t stand applying pencil to paper, you’d better think it through some more. And if you can’t write an intelligent answer to those questions, don’t do it.
- I really like my life. I’ve arranged my life so that I can do what I want.
- If you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don’t have to do anything I don’t want to do.