The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient.
Interpretation
The stock market rewards those who are patient while penalizing those who act hastily.
Warren Buffett's quote highlights the principle that investing in the stock market requires patience and long-term thinking. It suggests that individuals who rush into buying and selling based on short-term fluctuations are likely to lose their money, while those who take a more measured and patient approach stand to benefit from the movement of wealth in the market.
In practice
During a financial seminar, to emphasize the importance of long-term investments.
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.
Oneβs objective should be to get it right, get it quick, get it out and get it over. Your problem wonβt improve with age.
If you hope to have more money tomorrow than you have today, you've got to put a chunk of your assets into stocks. Sooner or later, a portfolio of stocks or stock mutual funds will turn out to be a lot more valuable than a portfolio of bonds or CDs or money-market funds.
This message (that attempting to beat the market is futile) can never be sold on Wall Street because it is in effect telling stock analysts to drop dead.
It's difficult to make your clients understand that there are certain days that the market will go up or down 2%, and it's basically driven by algorithms talking to algorithms. There's no real rhyme or reason for that. So it's difficult. We just try to preach long-term investing and staying the course.
It is important for investors to understand what they do and don't know. Learn to recognize that you cannot possibly know what is going to happen in the future, and any investment plan that is dependent on accurately forecasting where markets will be next year is doomed to failure.
I am more and more impressed with the possibilities of history's repeating itself on many different counts. You don't get very far in Wall Street with the simple, convenient conclusion that a given level of prices is not too high.
Liquidity is a good proxy for relative net worth. You can't lie about cash, stocks, and bond values.
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