Most of us seem to think its a great idea to invest in our own business but a

Most of us seem to think its a great idea to invest

This preview shows page 28 - 30 out of 263 pages.

Most of us seem to think it’s a great idea to invest in our own business but a bad idea to make an investment decision about someone else’s business. But what if it were just as easy, interesting, and fun to learn about someone else’s business as our own? And what if learning about someone else’s business and investing in it could be outrageously rewarding financially? Of course, that’s exactly what Ben Graham said for forty years and what Warren Buffett has been saying for fifty years: “Look at stocks as businesses.” THIS ISN’T THEORY, IT’S FOR REAL The cool thing about all of this is that it isn’t theory. It’s proven. I’ve done it, but if I were you I wouldn’t be impressed that some ex–river guide made some money. Big deal. Even a blind dog gets a bone once in a while. But if the best investor in the world used stockpiling to become one of the richest people in the world, well, that would be another story altogether, right? So let’s hear about stockpiling from Mr. Buffett in a letter written to Berkshire shareholders in 1997: H OW W E T HINK A BOUT M ARKET F LUCTUATIONS A SHORT QUIZ: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves. But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the “hamburgers” they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices. So smile when you read a headline that says “Investors lose as market falls.” Edit it in your mind to “Disinvestors lose as market falls—but investors gain.” Though writers often forget this
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truism, there is a buyer for every seller and what hurts one necessarily helps the other. (As they say in golf matches: “Every putt makes someone happy.”) We gained enormously from the low prices placed on many equities and businesses in the 1970s and 1980s. Markets that then were hostile to investment transients were friendly to those taking up permanent residence. When Down Is Up: When does the price going down make the profits go up? When you stockpile a great investment . As Warren Buffett points out in that letter, a down market is the best time for a stockpiler. A down market creates so many opportunities for the creation of wealth that even a little effort on your part will make you richer than you ever imagined you could be. This is, and I say this without any intentional hyperbole, the opportunity of a lifetime. Right
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  • Spring '20
  • Warren Buffett

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