Warren Buffett on Investing
Last week I included a link to Warren Buffett’s annual letter to Berkshire Hathaway shareholders. At the time, however, I failed to emphasize that it is an amazing read. So here it is again. Below I’ve highlighted some of my favorite parts:
On The Frequency At Which They Pick Good Investments (Page 4):
In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than so-so. In some cases, also, bad moves by me have been rescued by very large doses of luck.
Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years.
On The Long-term Benefits Of Stocks Over Bonds (Pages 4 & 5):
In 1994 Berkshire bought $1.3 billion of Coca-Cola. The dividend was $75 million. By 2022 the dividend had increased to $704 million, and the value of the shares has increased to $25 billion. Then he notes that had he instead put that money into a high-quality 30-year bond, “the disappointing investment” would have an unchanged value and be generating only $80 million / year of income.
On His Optimism For The Future (Page 9):
I have been investing for 80 years – more than one-third of our country’s lifetime. Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.
Charlie Munger On The Use Of Leverage (Page 10):
There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.
Warren Buffett is now 92-years old. Charlie Munger is 99. There is a lot to be learned from their experience. The letter is only eleven pages long, so check it out, hopefully, you enjoy it as much as I do, and let me know if you have any questions.
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