But thats because typical stock investo are not investors at all They dont

But thats because typical stock investo are not

This preview shows page 17 - 20 out of 263 pages.

business that stock represents. But that’s because typical stock investors are not investors at all. They don’t understand stockpiling, so they inadvertently have become speculators and outright gamblers. The unfortunate truth is that the financial services industry has conned many millions of people into their game of stock speculation via mutual funds. I’ll have a lot more on that in the next chapter . For now, let’s just remember that for this book and for the rest of your investing career, you must think of stocks as shares of a business, and yourself as the owner of that business. So if you buy just ten shares of Coca-Cola, you’re a part owner of Coke—not a stock investor in Coke. Got that? When you begin to think like this, you’re joining some truly great investors like Mr. Buffett, and you’re on the first step toward becoming a
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solid stockpiler of stocks, er, businesses. “The basic ideas of investing,” Mr. Buffett says, “are to look at stocks as a business, use a market’s fluctuations to your advantage, and seek a Margin of Safety. That’s what Ben Graham taught us. A hundred years from now, these will still be the cornerstones of investing.” From the late 1990s until 2008, Warren Buffett bought very few public stocks. He mostly just sat on about $45 billion of Berkshire Hathaway’s cash, waiting patiently for Mr. Market to become fearful enough about the future to bring the prices of wonderful public businesses down to levels at which he was willing to buy. In May 2008 Mr. Buffett told his fans at the annual Berkshire conference that he hoped the stock market would drop 50 percent so he could finally put all his cash to work. Then the market crashed, and in October 2008 he invested $20 billion in public companies. But here’s the classic part of the story: As prices of the businesses Berkshire owned—and still owns, as of this writing—plummeted, and the Berkshire stock price dropped accordingly, Mr. Buffett was attacked, again, for being over the hill and out of touch. The proof? The prices of businesses he owns were going down. This is not the first time he’s been accused of losing his touch. In the late 1960s he was sitting on a lot of Buffett Partnership cash. His unwillingness to chase high prices disturbed enough Buffett Partnership partners that Mr. Buffett dissolved the partnership, gave his partners back their money, and shifted his stockpiling strategy to
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Berkshire Hathaway, where he would no longer be required to deal with limited partners whining about his lack of investing activity. Of course, he turned Berkshire into the world’s most successful investment vehicle. Ten thousand dollars invested in Berkshire in 1969 is now worth $40 million. Again in the late 1990s, as mutual funds racked up big gains by buying technology stocks, Mr. Buffett was accused of being behind the times. His ideas became more popular after the Nasdaq plunged 85 percent during the dotcom bust.
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  • Spring '20
  • Warren Buffett

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