Learn to invest with Buffett

Chapter 78

Chapter 13 Section 4 Calculate the probability of winning and take appropriate risks

Risks and opportunities coexist in the stock market. Appropriate risk-taking can stimulate investors' aggressiveness. Rational risk-taking is an essential quality for investors to succeed. Pursuing an absolutely safe investment method is the biggest risk in itself.

--Warren Buffett
"Sometimes we also can't find the most ideal place for our funds - that is, to find a well-run business with a reasonable price. At this time, we will choose to invest funds in some short-term investment products with good quality , although we are also very clear that such an approach may not be able to make steady profits as we buy good companies, and may even lose money in a few cases, but in general, we believe that the probability of making money in these investment varieties It is still much higher than the probability of losing money, but the biggest question is when will its profit appear.

"Of course, in this case, it is risky to invest in zero-coupon bonds without keeping cash. This kind of investment based on the overall economic analysis is absolutely not guaranteed to be [-]% successful, but Charlie and I will never We will not give up such an investment opportunity easily, but will definitely use our best judgment ability. You are not asking us to come and do nothing. When we think we are sure of winning, we will not hesitate Do something different from your usual investing."

Can you also see from the above passage that Buffett is not always able to find investment opportunities that satisfy him? This is also a problem that ordinary investors will encounter, but a better choice than idle funds is to choose some An investment product with a high chance of winning may indeed have some risks, but after all, in this case, loss is a small probability event.

For example, in 1997, Buffett participated in three non-corporate equity investments unlike usual.The first one is 1400 million barrels of crude oil futures contracts. This is the remaining position of 1994 million barrels of crude oil he established between 1995 and 4570. The reason why he established these positions at the beginning was mainly because the price of oil futures at that time was somewhat underestimated. decisions made under consideration.

The second is silver. In 1997, he bought a total of 1.112 million ounces of silver.If calculated according to the market price at that time, it would contribute a total of US$1997 million in pre-tax benefits in 9740, because Buffett had been tracking the fundamentals of precious metals before, but there was no buying action before.Until recent years, the inventory of silver bars has dropped sharply. However, inflation expectations, which are more concerned by ordinary people, are not within the scope of Buffett's calculated value.

The last investment was U.S. zero-coupon bonds. He used $46 billion to amortize the book value of long-term U.S. zero-coupon bonds. The price of these bonds will
Fluctuates widely due to changes in market interest rates.If interest rates fall, investors may make a lot of money. Due to the sharp decline in profits in 1997, Berkshire's unrealized benefits have reached $1997 million in 5.98 alone.

Investment motto:

There is a saying in the stock market that is very good, that is, returns are always accompanied by risks.Sometimes investors have full confidence and certainty in the type of investment, but in most cases they are uncertain, but if they do not invest because of the possibility of losses, investors may miss a lot of profit opportunities .Therefore, for investors, appropriate risk-taking is also necessary for investment, but the premise is that you have to calculate your own probability of winning.

(End of this chapter)