The benefits of correction only come when unexpected money falls into your lap: Warren Buffett

Warren Edward Buffett, with a net worth of more than $100 billion is one of the most successful investors in the world. Known as the Oracle of Ohama, he runs Berkshire Hathaway. He is also a philanthropist. Buffett’s investment wisdom is followed by millions of investors worldwide. We have mentioned below some of his wisdom in his own words. 

Do not wait for a correction

To sit there and hope that you buy stocks in the throes of some panic is like taking the attitude of a mortician, waiting for a flu epidemic or something. You never get the benefits of the correction unless you just come into some accidental money at some time.

Opinion on Day Trading 

Day trading is close to gambling, but people like gambling. The human propensity to gamble is huge. The easier the trading technology, the easier to gamble. Gambling is a tax on ignorance. 

The idea of holding Cash

We would never have cash around just to have cash. We would never think that we should have a cash position of x% and I think the cash allocation things that tacticians in Wall Street put out about 60% stocks and 30% cash, we think that’s is total nonsense. We want all our money working in a decent business but sometimes we cannot find it or sometimes cash comes unexpectedly or sometimes we sell something and we have more cash around than we would like. 

Market Conditions

If we are right about a business, if we think a business is attractive, it would be very foolish for us to not take action on that because we thought something about what the market was going to do. Because we just don’t know and to give up something that you do know and that is profitable for something that you do not know and won’t know, because of that, just does not make any sense to us.

Diversification

We like to put a lot of money into the things that we feel strongly about, and that gets back to the diversification question. We think diversification as practice generally makes very little sense for anyone who knows what they are doing. Diversification is a protection against ignorance. 

Risk

Volatility is not a measure of risk. It is nice, mathematical, and wrong. Past volatility does not determine the risk of investing. Risk comes from the nature of certain kinds of businesses. It comes from not knowing what you are doing.

High IQ

You are right because your facts and reasoning are right not because thousands of people agree with you. You need a stable personality. You need a temperament that neither derives great pleasure from being in the crowd nor against the crowd. Investing is not rocket science. You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. 

Growth Stocks

There is no such thing as value or growth stocks. They are part of the same equation. Growth is usually positive for value. Those who talk about value or growth stocks do not know anything. If the business grows, you can call its value or grow.