Great demonstration by Buffett on buy and hold and staying the course

Start watching from the 1 minute mark

Cheers,
Oracle

 

And the amazing thing - $10,000 invested in Berkshire in 1964 (2 decades later than the starting point in his example) would be worth around $240 million today. Thats what makes Warren Buffet such a champ, significant out performance of the index through active investing over many decades.

Here's How Much $10,000 Invested in Berkshire Hathaway Stock in 1964 Is Worth Now -- The Motley Fool

 

These are several quotes from the books i have on Warren Buffett, 1994..

""We just focus on a few outstanding companies ..We're focus investors..""

That was from a book I bought second hand in the mid 1990'"s..
quote ..
""The fatal flaw is that given the complexity of the financial universe ,prediction'' are impossible..""

""The know-nothing investor can actually outperform most investment professionals""

""Think long-term :five to ten years ,minimum..""

""Limit yourself to the number of companies you can truly understand ..Ten to twenty is good ,more then twenty is asking for trouble.""

""Volatility happens , Carry on..""

This is also worth reading if you buy a copy..imho..
The General Theory of Employment, Interest and Money - Wikipedia

 

Some Buffet extracts that have stood out to me:

1. Another situation requiring wide diversification occurs when an investor who does not understand the economics of specific business nevertheless believes it is in his interest to be a long-term owner of American industry. That investor should both own a large number of equities and space out his purchases. By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals. Paradoxically, when “dumb” money acknowledges its limitations, it ceases to be dumb.

2. Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

3. Stocks are the things to own over time. Productivity will increase and stocks will increase with it. There are only a few things you can do wrong. One is to buy or sell at the wrong time. Paying high fees is the other way to get killed. The best way to avoid both of these is to buy a low-cost index fund, and buy it over time. Be greedy when others are fearful and fearful when others are greedy, but don't think that you can outsmart the market. Very few people should be active investors.

4. Successful investing takes time, discipline and patience. No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.

5. The goal of the non-professional should not be to pick winners – neither he nor his ‘helpers’ can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal….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. 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.

6. There is no doubt that there are far more ‘investment professionals’ and way more IQ in the field, as it didn’t use to look that promising. Investment data are available more conveniently and faster today. But the behavior of investors will not be more intelligent than in the past, despite all this. How people react will not change – their psychological makeup stays constant. You need to divorce your mind from the crowd. The herd mentality causes all these IQ’s to become paralyzed. I don’t think investors are now acting more intelligently, despite the intelligence. Smart doesn’t always equal rational. To be a successful investor you must divorce yourself from the fears and greed of the people around you, although it is almost impossible.

7. “You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with Pepsi, you should be OK.”

“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.”

“What investors then need is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”

7. It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals — to measure their investment 'risk' by their portfolio's ratio of bonds to stocks.

8. There is simply no telling how far stocks can fall in a short period. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.

9. Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur.

 

I have not read a lot about Messieurs Buffet and Munger so most of the extracts provided by @Nodrog are new to me. They tend to make sense.

As to attitudes to shares in general, many moons ago I was in discussion with my then accountant who is now retired. An old stager and a cunning one too. Had a few delightful rough edges. She gave me a bit of a history lesson.

Way back, there were trading floors on the stock exchange. All the guns generally had the same information, all were aggressive, probably about average intelligence and each had a personal view of the action taking place.

At the end of the day some were in the money, some weren't. Next day it happened again. Some who lost yesterday were up, so were some who won the previous day and some who were up the day before were down today. Rinse and repeat.

Now with the internet and trading tools there are literally thousands who have access to the information. Price/Earning ratios, GARP, moving averages, you name it. There are many predictors and many people making predictions on shares and market movements.

She reckoned she could count on the fingers of one hand the number who consistently made a profit.

Read into that what you will.

 

I knew quite a number of traders personally through attendance of ATAA meetings and through acquaintances when young and stupid. Very few did well over time. Those that did best appeared to have a similar business model. Publish a book which automatically had people thinking you were an expert. Follow up with a tour of courses / workshops. Start an online paid subscription trading advice newsletter. Invest proceeds of same into property and / or long term dividend share holdings. This heavily supplemented the megre earnings from their personal trading.

Which is why I think the following quote from Buffet is so powerful:

By “dumb” Buffet is referring to the vast majority of people except for a very, very small number of investors / traders with a rare and unique ability.

It just takes some investors / traders longer than others to finally figure this out. Unfortunately I was a slow learner.

 

@Nodrog you know number 7 means no booze, right?

 

Well even Buffet’s not perfect and has been known to be wrong at times. And I need to be more careful with my editing. Besides I never buy when under the influence.