And there is another reason to not be too concerned about what the Harvard boys

And there is another reason to not be too concerned

This preview shows page 157 - 159 out of 263 pages.

And there is another reason to not be too concerned about what the Harvard boys are doing: They follow the crowd. They have to. They cannot hold something that’s going down in price. It’s going to make them look bad to their investors and then they will lose their investors and then they will lose their jobs. These guys are very bright, but they have a different drummer to dance to. They’re in the business of keeping their clients and gathering more assets to manage. You’re in the business of making a lot of money. These two businesses can dictate very different responses to a market situation. Today’s market affords us a great time to find wonderful businesses on sale. But they aren’t all on sale by any means. Lots of fund managers, though, do talk as if everything is on sale. They’re shouting that this is a great time to buy their fund so they can buy up a whole bunch of Coca- Cola and J&J and Wal-Mart (i.e., the “recession”-type stocks). But guess what? Those stocks have already been bought up by other fund managers, so they aren’t on sale at all. In fact, if the analysts are right about the next five years, there is no way you’ll make a 15 percent return in any of them. By Rule #1 standards they are all at or above their retail value. And this is what the “smart” boys are buying. Because the other “smart” boys are buying, too. It’s a game we don’t play. Do not be afraid of going against the guys from Harvard. They’re playing a very different game than you. They know their game well. You learn yours. Rule #1 and stockpiling are made for the small investor who has no one to answer to but himself and his family. And the more you do this, the more confidence you’ll have that you are every bit as qualified to invest your own money as any Harvard guy. And don’t forget who lost half the money in your 401(k). That’s right. The Harvard guy. Or someone darn near like him.
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You own it. You watch it. And you just wait for it to drop so you can add more. STEP SIX: STOCKPILE IT Now you own your business and you watch it and you look for the opportunity to snap up more of it at a great price. You’re adjusting price for major fundamental changes in the business and the industry. And you are patient. You’ve only put in about 25 percent of the total capital you want to invest in this business. You want to buy more. You’re ready to stockpile it. You just need the price to go down. Our partner, Mr. Market, gets to set the price. He doesn’t care if we buy or sell. He’ll take the other side of the trade. The thing we have to remember about Mr. Market is that he operates on fear and greed. The more the news is bad, the more fear he feels, the more he’s afraid he’ll get stuck with a bunch of bad businesses, so he drops the price. You must know your business well enough so that when Mr. Market becomes very fearful and begins dropping the price, you know he is wrong to be afraid.
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  • Spring '20
  • Warren Buffett

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