A letter a day!

A letter a day!

Letter 14# 1966 (Half yearly letter)

Key learnings:

1. When others are making money in the general run of the market you should too, but when everyone is losing it’s okay to lose money at the same rate. It is not always necessary that you will lose a little less than others ( though we all intend to do that). Never promise such things.

2. Always prefer an iceberg approach to investment disclosure. ( Not disclosing everything at once).

3. Don’t buy/sell stocks upon what other people think the stock market is going to do but rather what you think the company is going to do. As Buffett said

“The course of the stock market will determine, to a great degree, when we will be right, but the accuracy of our analysis of the company will largely determine whether we will be right. In other words, we tend to concentrate on what should happen, not when it should happen.”

4. On-market prediction and guessing

“Let me again suggest two points: (1) the future has never been clear to me (give us a call when the next few months are obvious to you – or, for that matter the next few hours); and, (2) no one ever seems to call after the market has gone up one hundred points to focus my attention on how unclear everything is, even though the view back in February doesn’t look so clear in retrospect.
If we start deciding, based on guesses or emotions, whether we will or won’t participate in a business where we should have some long-run edge, we’re in trouble. We will not sell our interests in businesses (stocks) when they are attractively priced just because some astrologer thinks the quotations may go lower even though such forecasts are obviously going to be right some of the time. Similarly, we will not buy fully priced securities because “experts” think prices are going higher. Who would think of buying or selling a private business
because of someone’s guess on the stock market?”

Buffett also recommends reading a chapter of the book Intelligent investor here

“A marvelous articulation of this idea is contained in chapter two (The Investor and Stock
Market Fluctuations) of Benjamin Graham’s “The Intelligent Investor”. In my opinion, this chapter has more investment importance than anything else that has been written.”