Wednesday, January 25, 2017

Risks of Moving In and Out of Investments

Portrait of Warren Buffett Depicting Inspirational Quotes
Portrait of Warren Buffett Depicting Inspirational Quotes

"Since the basic game is so favourable, Charlie and I believe it's a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of "experts" or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it." Warren Buffett

First and foremost emphasis everywhere in italics is mine to highlight the importance.

What Warren Buffett means in this expression is that he and his partner and close friend Charles Munger had realised that moving in and out of investments in wonderful companies like Gillette (the word it in the quote) based on minor and irrelevant changes, news and so called experts who generate unwanted noise over television channels, day in and day out, is a terrible mistake. 

Wonderful companies have a long track record of successfully navigating occasional business difficulties. Business problems are a natural part of doing business and every company worth it's salt encounters such difficulties and resolves them.

Warren Buffett say that he and Charles Munger had figured out that selling highly valuable stocks of such great companies can keep you out of the game (remaining un-invested or divested) which is far more greater risk than remaining invested (being in the game).

Charles Munger Warren Buffett's partner and friend
Risks of Dancing In and Out of Investments

In conclusion, the moral of the story is once you have identified excellent companies after a rigorous process of filtering and scrutiny, stay invested unmindful of frivolous news and predictions of so called experts.

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