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Munger on Patience



March 02, 2012 – Comments (3)


"There are a lot of things we pass on. We have three baskets: in, out and too tough. A lot of stuff goes into the ‘too tough’ basket. We can’t do that if it’s a problem at a Berkshire subsidiary company, but if we don’t own it, we just pass. I don’t know how people cope trying to figure everything out.

We have to have a special insight, or we’ll put it in the ‘too tough’ basket. All of you have to look for a special area of competency and focus on that."

-Charlie Munger 

3 Comments – Post Your Own

#1) On March 02, 2012 at 8:32 PM, XMFConnor (97.10) wrote:

"Over many decades, our usual practice is that if something we like goes down, we buy more and more. Sometimes something happens, you realize you’re wrong, and you get out. But if you develop correct confidence in your judgment, buy more and take advantage of stock prices."


 -My goal this year is to really improve my patience in investing. Not just talk about being a long-term investor, but to really mean it and hold myself accountable. 

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#2) On March 03, 2012 at 12:37 AM, awallejr (33.36) wrote:

Well you can try to invest, like Buffett does, or you can try to trade like Jim Cramer does.  The problem is Hight Frequency Trading computers have changed the game.  Volatility is king.  The retail investor is gone and won't be back soon.  The SEC doesn't care.

What's the knock on this rally?  Low volume.  But who cares if your stock went from 20 to 30.  Come May you will start giving it all back.  Because the computers will kick in.

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#3) On March 03, 2012 at 2:05 AM, daveandrae (< 20) wrote:

I'm going into my tenth year as a Pfizer shareholder. 

Back in the 2004, the stock was trading around 38. My cost basis back then was 29. At that time I  had only amassed around 3-400 shares. A friend of mine told me that the stock was "technically" over extended, and that I should get out.

I told him I wasn't interested in short term results. 

Good thing.

Over the next two years the stock proceeded to fall jaggedly to 20.62. From here, it rallied up to 29 by 2007, only to then fall to yet another new low of 11.13 during the "great recession" of 2009.

Still, I held on.  In fact, I added to my position aggressively between 2008-2010. Fast forward today and I'm now holding a grand total of  2,382 shares of Pfizer stock. My cost basis today is 19. 

There are two morals to this story.

1.  There is absolutely, positively, NO correlation whatsoever between "investment performance" and Investor Return. In fact, as you can see, they're wildly diametrical. 

2. Over the next ten years, you are far, far more likely to be a net buyer of stocks as opposed to a net seller. Thus, what do you want the market to do? You want it to go Down. WAY DOWN!

Remember, every market price decline must also be,  a market rally in dividend yield and book value. Most people don't see this. They sell harder and harder as prices go lower and lower.

This is yet another reason why most people are not wealthy.....Everyone loves a sale until there's one on wall street.

Good luck :-) 




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