When Berkshire buys common stock, we approach the transaction as if we were buying into a private business.
Interpretation
Investing in stocks should be treated like buying a stake in a private business, not just a quick financial transaction.
Warren Buffett emphasizes the perspective that investors should adopt when purchasing stocks. He suggests viewing these investments not merely as numbers on a screen, but as ownership in actual businesses with underlying value and potential for growth. This mindset encourages a deeper analysis of the company’s fundamentals and promotes long-term investment strategies rather than short-term speculation.
In practice
During a financial seminar to explain the importance of long-term investing strategies.
I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money and there will be a lot - and it's a lot - it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.
If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record? Or be thought of as the world's worst investor when you were actually the best?
Cash never makes us happy, but it's better to have the money burning a hole in Berkshire's pocket than resting comfortably in someone else's.
I think you should read everything you can. In my case, by the age of 10, I'd read every book in the Omaha public library about investing, some twice. _x000D_ You need to fill your mind with various competing thoughts and decide which make sense.
The most common cause of low prices is pessimism - some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.
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.
When most investors, including the pros, all agree on something, they're usually wrong.
As I have said before, the daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing.
There are substantial rewards for adopting a regular routine of investing and following it no matter what, and additional rewards for buying more shares when most investors are scared into selling.
Invest at the point of maximum pessimism.
Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.
There's no use diversifying into unknown companies just for the sake of diversity. A foolish diversity is the hobgoblin of small investors. That said, it isn't safe to own just one stock, because in spite of your best efforts, the one you choose might be the victim of unforeseen circumstances. In small portfolios, I'd be comfortable owning between three and ten stocks.
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