So I haven't posted in almost a month now mainly because I've been pretty busy with school work. I thought I'd try to do a series of posts on something I've been wanting to do for a while which is talk about some of the great quotes from one person I admire greatly (along with many others), Warren Buffett. Here is the first part of my series with two quotes I pulled.
"The stock market is a no-called-strike game. You don't have to swing at everything--you can wait for your pitch."
There are often many comparisons made between investing and American baseball. And for anyone who has played baseball, I think Buffett's quote is quite provoking. Many people may not realize it at first, but when I started investing, I often was worried about the cash I had on hand. As days past by and the markets went up, it felt like I was missing all the opportunities. Somewhere in my subconscious, I probably was counting the strikes as I missed entering into a market because I thought it was too expensive and only getting more so. However, patience really is one of the ultimate virtues when it comes to investing. Sometimes the hardest thing to do is nothing and wait. But it is important to put your money into an investment idea only after you have done your due diligence and built up your conviction to stay with a particular asset for a long period of time.
"Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get.' Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."
Another great comparison is between the stock market and consumables. Let's say you were going to buy a steak at the grocery store. For whatever reason, you wait a day and the next day it is on sale, 50% off. 'What a great deal! I'll probably take 2.' is something you might be thinking. However, let's take that same situation with a stock. Let's say you were going to buy a company XYZ's stock one day but, again for whatever reason, you wait a day and the next day the price of the stock is down 50%. 'Holy crap! What is wrong with XYZ? Maybe I won't buy it at all' is something most investors would think. Are the two exactly the same? No, investing in companies and buying food are fairly different but not so different to mistakenly confuse the price of something with its value. Steaks are steaks; you know how happy you will be when you eat one so if the price goes down, you can get a lot more value with your money. Theoretically, if you have researched enough and determined the value of XYZ's stock, you should approach decreases in the stock price the same way you would approach a grocery store sale. Again, it is important to have conviction going into your investment ideas and not equate the price of something with its value. If you really think about it, the value of a company does not fluctuate 1-5% day to day, but the price usually does.