In his 2004 letter to shareholders, Buffett wrote: “Over the past 35 years, American companies have created an excellent track record, and it stands to reason that investors should also get rich returns, as long as everyone rides the wind in a decentralized and low-cost way. Can. In fact, index funds can also achieve this purpose, but why is the performance of most investors disastrous?
I think there are three main reasons for this. The first is that transaction costs are too high, investors come in and out too frequently, or spend too much on investment management. The second is that investment decisions are often based on gossip rather than rational and quantitative corporate evaluations. Third, the method of trial and error plus the wrong time of intervention, such as intervening at the high point when the bulls have risen for a long time, or exiting at a low level after a period of bottom trend. Investors must remember that overexcitement and high transaction costs are the enemy, and if you must invest in stocks, I think the correct mindset should be to be afraid when others are greedy, and to be greedy when others are afraid.
The three reasons mentioned above are often encountered by many people. Of course, sometimes you can make money by repeatedly buying and selling stocks, as well as listening to news to buy stocks, but these are temporary, and most of them are related to luck and cannot be replicated. I think it is best for us to invest in a long-term and stable profit, so that we can really make money. If you can’t make a steady profit, you will make money with good luck this time, and you will lose money next time with bad luck. You may gain or lose money, and you may end up playing a lonely game, spending time and making no money. It is best to learn how to value companies and how to face market fluctuations. Once these two aspects are passed, making money is a high probability thing.
Buffett wrote: “Our failure once again highlights the importance of the principle not to complicate things, but to keep things simple as much as possible. This principle is widely used in our investments and business operations. If a certain A decision has only one variable, and that variable has a 90% chance of success, so obviously you have a 90% chance of winning. But if you have to overcome ten variables to reach your goal, your odds of success in the end will be only 35%.
To make money, buy low and sell high. So you can make money by buying when the stock is below its intrinsic value and selling when it is above its intrinsic value. Keep things simple, and you’ll be a lot easier, and it’s easier to seize opportunities. And if you make things more complicated, there are too many variables and factors to consider, often looking ahead and looking back, and when the opportunity comes, you may not dare to start.
Buffett wrote: Some people may think that the stocks in our portfolio are bought and sold on the basis of candlestick charts, salesperson recommendations, or the company’s recent profit forecast. From the owner’s point of view, it’s a very big difference. In fact, this has been the essence of my investing behavior for decades, since I was nineteen, after reading Graham’s “The Intelligent Investor”, I had a hard time, and before that, although I had already invested in the stock market , but in fact have no concept of investment at all.
Since we bought these stocks, due to the increase in price-to-earnings ratio, the growth rate of stock price is higher than that of earnings growth. For individual single years, the stock price and the operating conditions of the company itself often diverge. During the Great Bubble , the stock price rose far more than the performance of the industry, as for the bubble burst, its performance is just the opposite.
Of course, Berkshire’s performance should have been better if I could have mastered the knack of the change. Everyone would say this after the fact, but it’s a pity that what investors really need is foresight, but the picture ahead is murky. And our huge investment position has greatly improved the difficulty of flexible entry and exit.
The concept and method of value investing are just a few words. It looks very simple, but it is very difficult to do it. Read more, read more corporate reports, learn to value, learn to face stock price fluctuations, lower investment expectations, and have a good attitude in order to succeed.
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