Learn to invest with Buffett

Chapter 91

Chapter 15 Section 3 Don’t Chase Ups and Downs

Don't waste your time and energy analyzing what the economic situation is, watching the daily rise and fall of stocks, the more time you spend, the easier it is for you to fall into the confusion of thoughts and be unable to extricate yourself.

--Warren Buffett
Buffett believes that the stock market is a place of alternating mania and depression, sometimes excited by future expectations and at other times irrationally depressed.Sometimes the stock prices of great companies fall to unreasonably low prices, while some of the worse companies rise to unreasonably high prices.Just as we cannot fully trust the advice of an advisor prone to emotional ups and downs, we should not allow the stock market to manipulate our investing behavior.

There is no stock-quote terminal in Buffett's office, but Buffett still walks through the stock market with ease.Buffett believes that it is illogical for a person to pay attention to the daily changes in the stock market if he intends to own shares of an outstanding company and hold them for a long time.In the end he will be amazed how much more valuable his portfolio would have been without constant attention to market changes.

In Buffett's investment career, large investments such as Coca-Cola, American Express, Goldman Sachs, etc., all occurred during the stock market downturn when the stock prices of these companies were undervalued.In Buffett's view, the only advantage of short-term price fluctuations in the stock market is that it gives him the opportunity to increase his holdings at a cheaper price.

Many investors like to chase ups and downs. When they see stocks rising, they get excited and immediately have the passion to buy. After buying, they will be terrified when the stocks fall, and they can only sell to seek relief.This will not only make no money, but also make investors physically and mentally exhausted.Buffett believes that whether a stock is worth buying depends on the difference between the intrinsic value of the stock and the current stock price, rather than the recent rise and fall of the stock.If an investor decides to buy a stock just because it thinks it's a cheap stock because its price has fallen a lot, it's completely missing the point.The world's financial godfathers Graham and Fisher suffered heavy losses in the financial turmoil from 1929 to 1932 is a typical lesson.If you are interested in stocks when everyone else is interested, most stocks will be overvalued at that time, and you will enter the market at a high cost, so the probability of making money is relatively small.

Investment motto:

Don't be blinded by the price fluctuations of the stock market at any time.Only by carefully analyzing the intrinsic value of the stock and carefully comparing the difference between the intrinsic value of the stock and the current stock price to determine whether there is a purchase value is the correct way to invest.

(End of this chapter)