Learn to invest with Buffett

Chapter 101

No.16 Chapter 6 Earn more while napping than when awake
Our portfolio still hasn't changed much, and we're obviously making a lot more money when we're asleep than when we're awake.

——Warren Buffett's letter to shareholders in 1995
Buffett believes that it is very important to choose excellent companies for investment.If you choose the right company and hold it for a long time, investors can earn huge returns without doing anything.

In Buffett’s view, investors’ investment performance is not graded in the same way as Olympic diving competitions. Companies with constant variables and complexities can be said to be comparable.Whether a company is excellent or not, the standard is actually very simple.As long as the company has a sustainable competitive advantage and is run by good managers with both talents, then this company is a good company.If investors invest in stocks strictly according to such standards, there are two advantages: first, the possibility of investment loss is very small; It's also easier.

In addition, when investors encounter excellent companies, they must hold them for a long time.In Buffett's view, the stock market is ineffective.Short-term fluctuations in stocks are meaningless, and long-term stock prices depend on the intrinsic value of the stock.Therefore, when investors choose investment companies, they should not pay attention to the trend of the Dow Jones Index, the trend of the Federal Reserve or the development of the overall economy, but should pay attention to the future prospects of these companies themselves.Buffett thinks it is a very stupid thing to give up buying a good company with reasonable long-term prospects because he is worried about short-term uncontrollable economic or stock market variables.

The stock prices of many companies are like this.While they can fluctuate a lot in the short term, they are consistent with their intrinsic value in the long run.Coca-Cola is a typical example.Looking back on the past 21 years, from the end of 1987 to August 2009, 8, Coca-Cola rose from $31 to $3.21, a cumulative increase of 48.77 times, and the S&P 14.19 rose from 500 points to 247 points, a cumulative increase of 1020 times. In general, Coca-Cola has far outperformed the market for 3.13 years. As a kid in 21, Buffett bought half a dozen Cokes for $1930 and sold them at a profit of 25 cents a can.Now that decades have passed, Buffett is still very optimistic about Coca-Cola.Coca-Cola stock has also brought huge profits to Buffett.Buffett once said that he hopes to hold a stock like Coca-Cola for the rest of his life.As long as he owns a stock like Coca-Cola, he can consistently earn handsome returns, more than he has ever gotten from making other new investments.This is what Buffett calls "make more money while you're asleep than when you're awake."

Investment motto:

For investors, it is particularly important to choose an excellent company.As long as you choose the right company and hold the company's stock for a long time, investors will often get a lot of wealth after ten or 20 years.

(End of this chapter)