We believe that almost all really good investment records will involve relatively little diversification. The basic idea that it was hard to find good investments and that you wanted to be in good investments, and therefore, you'd just find a few of them that you knew a lot about and concentrate on those seemed to me such an obviously good idea. And indeed, it's proven to be an obviously good idea. Yet 98% of the investing world doesn't follow it. That's been good for us.
If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value.
The idea of excessive diversification is madness.
I started trading around 1979, fresh out of college. In the early '90s, I started guesting for major news media.
A price drop in a good stock is only a tragedy if you sell at that price and never buy more. To me, a price drop is an opportunity to load up on bargains from among your worst performers and your laggards that show promise. If you can't convince yourself "When I'm down 25 percent, I'm a buyer" and banish forever the fatal thought "When I'm down 25 percent, I'm a seller," then you'll never make a decent profit in stocks.
I made my money by selling too soon.
The idea of excessive diversification is madness. Wide diversification, which necessarily includes investment in mediocre businesses, only guarantees ordinary results.
There are two times in a man's life when he should not speculate [on the Stock Market]: when he can't afford it, and when he can.
Samuel Langhorne Clemens, 1835-1910
The way to become rich is to put all your eggs in one basket and then watch that basket.
Making an investment decision is like formulating a scientific hypothesis and submitting it to a practical test. The main difference is that the hypothesis that underlies an investment decision is intended to make money and not to establish a universally valid generalization.
There's lots of stocks out there and all you need is a few of 'em. That's been my philosophy.
Having the opportunity to follow the market frequently gives you the opportunity to see if you need to reevaluate your portfolio. But reevaluating your portfolio shouldn't trigger a sell signal so frequently.
Risk comes from not knowing what you are doing so wide diversification is only required when investors are ignorant. You only have to do a very few things in your life so long as you don't do too many things wrong.
I feel like I grew up in the investment business. My dad was at T. Rowe Price his whole career. We lived in Baltimore and had a small social circle, so most of my dad's friends also worked for T. Rowe.
The first thing I heard when I got in the business - not from my mentor - was, 'Bulls make money, bears make money, and pigs get slaughtered.' I'm here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig.
Stock-picking is like gambling: those who win well, seldom bet, but when they do, they bet heavily.
Behold, the fool saith, "Put not all thine eggs in the one basket" - which is but a matter of saying, "Scatter your money and your attention"; but the wise man saith, "Pull all your eggs in the one basket and - WATCH THAT BASKET." - Pudd'nhead Wilson's Calendar
I used to do a lot of the day trading and the stocks. I used to have the Ameritrade and trade options.
If you buy something because it's undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That's hard. But if you buy a few great companies, then you can sit on your ass. That's a good thing.
If you know how to value businesses, it's crazy to own 50 stocks or 40 stocks or 30 stocks, probably because there aren't that many wonderful businesses understandable to a single human being in all likelihood. To forego buying more of some super-wonderful business and instead put your money into #30 or #35 on your list of attractiveness just strikes Charlie and me as madness.
Finding a single investment that will return 20% per year for 40 years tends to happen only in dreamland. In the real world, you uncover an opportunity, and then you compare other opportunities with that. And you only invest in the most attractive opportunities. That's your opportunity cost. That's what you learn in freshman economics. The game hasn't changed at all. That's why Modern Portfolio Theory is so asinine.
All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.
Fund consultants like to require style boxes such as "long-short," "macro," "international equities." At Berkshire our only style box is "smart."
Because everybody else was investing in the consumer Internet, I did, too.
Diversification is protection against ignorance. It makes little sense if you know what you are doing.
