Learn to invest with Buffett

Chapter 20

Chapter 3 Section 4 The fewer stock transactions, the better

Given the size of our capital, Charlie and I have not been smart enough to buy and sell frequently to achieve extraordinary investment results.We also don't think anyone else has been able to fly like a bee from one little flower to another to achieve long-term investment success.

--Warren Buffett
Buffett believes that although selling stocks is inevitable, it is necessary to reduce the number of stock transactions as much as possible in order to reduce transaction costs and increase investment profitability.He said that this is not only in line with the long-term investment philosophy of stocks, but also avoids using the small amount of money already earned to pay transaction commissions.

Since the stamp duty was raised from 2007‰ to 5‰ on May 30, 1, the burden has become even heavier.There is a saying in the stock market: "Buy and sell 3 times." This sentence is too concise. , The capital is finished!" This "playing over" means "lost all money"!
Every time a stock is bought, stamp duty of 3‰ is paid to the state, and a commission of about 2‰ is paid to the brokerage, totaling 5‰; every time a stock is sold, the same is true.In this way, one time after another, that is, one purchase and one sale, the total tax paid is 10‰ or 1%!Then, assuming that you operate with a full position and do not lose or make money, if you buy and sell 100 times, all your capital will be "contributed" to the treasury as taxes and put into the pockets of the brokerage!
Whether you are a retail investor, a medium investor or a large investor, whether you are an ordinary investor or an institutional investor, whether you invest 1 yuan or tens of thousands of yuan, hundreds of thousands of yuan, millions of yuan, or even tens of millions of yuan, 10 million yuan or several 10 billion yuan, as long as you buy and sell 100 times with a full position, if you do not lose or make a profit, you will also be unable to escape the fate of "playing over" (in terms of commission collection, brokerages may also give you and institutions "discounts"; But on the issue of stamp duty, everyone is equal, even the self-operated part of the brokerage cannot pay a penny less)!
In the first half of 2007, the total turnover of A and B shares in the Shanghai and Shenzhen stock markets was 23.71 trillion yuan, and the stamp duty on securities transactions was 6.23 million yuan, an increase of 7.7 times over the same period of the previous year, of which 6 billion yuan was realized in June.The commission is calculated at 318‰, and the total commission of the two cities in the first half of the year was 2 billion yuan.In the second half of the year, the two cities will still be calculated based on the 948.4 trillion yuan of transactions in the first half of the year, the stamp duty will be 23.71 billion yuan, and the commission will still be 1422.6 billion yuan, so the total stamp duty commission for the whole year will be 984.4 billion yuan.This does not include transfer fees, billing fees, and transaction fees for warrants and funds, which may exceed 3978.4 billion yuan. What is the concept of 4500 billion yuan? If calculated based on the number of 4500 million accounts opened, each account is 1 yuan. In fact, most investors have two accounts in Shanghai and Shenzhen, so in fact, each account is 4500 yuan on average.If the funds of large households are 9000 million yuan, 100 large households will be eliminated. In 45, 2006 listed companies in Shanghai and Shenzhen realized a net profit of 1474 billion yuan, and the annual handling fee was 3781.17% of the total annual net profit of these 1474 companies. Not enough to pay the handling fee.

Every time you buy or sell, the capital will be reduced by 0.6% on the original basis, that is, it will become 0.994 times of the original.Therefore, every time a transaction is made, only 0.994 yuan is left for one yuan.Assuming that only 10000 yuan of 100 yuan is left after buying and selling n times, then: 10000×0.994 to the 2nth power=100, that is: n=-(lg0.994)-1, get: n is about 383.That is, after 10000 transactions of 383 yuan, only 100 yuan remains, or any amount of equivalent funds will become 383% of the original amount after 1 transactions.

In addition, if we earn 10% first and then lose 10%, for example, if we invest 10000 yuan, we will earn 10 yuan if we earn 11000%, and then lose 10%, leaving only 9900 yuan. Repeat this, it will only take about 4 years, 10000 yuan The principal is almost gone.

Investment motto:

Some investors often think that as long as they can make money, they don't care about the handling fee.In fact, investment requires careful accounting, and handling fees are not a small burden for investors.

(End of this chapter)