Take a minute and read this letter in its entirety. I promise you won’t regret it. It is a letter written from Ernest Buffett (Warren’s grandpa) to his son Fred (Warren’s uncle) in 1939:
Dear Fred & Catherine:
Over a period of a good many years I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash. I have known people who have had to sacrifice some of their holdings in order to have money that was necessary at that time.
Originally posted 2013-06-06 11:59:42.
Often enough, you will hear from conventional financial planners that quickly entering and exiting certain stock market investments has the realistic possibility of being a futile endeavor, and usually the explanation “why” simply focuses on the fact that stock market prices are fickle in the short term and can take years and years to correctly reflect the value of the enterprise you have in mind. That’s absolutely part of the equation, but there is more to it than that: almost all of the stock market’s gains come in very short bursts that are wildly unpredictable.
Originally posted 2013-06-06 09:00:05.
Here is a quick overview of today’s movements in the stocks I “follow” on my Seeking Alpha homepage:
As you can see, the price of every single company that I follow went down today. For some people that try to buy a stock at $30 and sell it at $70, that is bad news. It means they are losing money.
But if you craft a long-term strategy and think like a business owner, you will develop the kind of wiring that appreciates falling stocks because it matches your goals. When I invest, I am trying to buy the most future profits (in the form of dividends and retained earnings) at the lowest price I can, adjusted for risk. I make an exception here and there to DRIP into a high quality stock, or set aside 3-5% of the portfolio for speculation, but aside from those two exceptions, that’s what I’m about.
Originally posted 2013-06-05 22:34:28.