Snighter A.
Research & Product Development at ArthVeda Fund Management Pvt. Ltd
DID WARREN BUFFET MAKE A WRONG MOVE IN INVESTING FOR WHICH HE REGREATS (Lost a huge sum due to that??)
I would like to know if Mr Warren Buffet ever incurred losses during investing or burnt his fingers enough…….(everyone gains and losses in the stock market what I am asking is weather he made a terrible move thereby loosing a fortune in his whole tenure?)
Good Answers (6)
David T.
International Executive Recruitment, Talent & Human Capital Specialist.
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Warren Buffet has an investment strategy of only investing in things he understands and then only in fairly established high quality companies, his preference if to aquire entire companies rather than invest in stocks, shares and bonds.
This explains why he avoided exposure to the dot com boom / bust, higher risk higher yield tech sectors and his penchant for the P&C Insurance sector.
Secondly his strategy is as a long tail investor, he prefers long term growth over short term profit as key and can ride out market blips and down turns. He buys at the right price and gains value by growth in the business and capital markets.
He is more of a VC/Private Equity investor who puts his money into companies with good solid financials and back the management team. As a cautious investor and not a speculator his losses are less spectacular and considerably rarer.
He does not therefore gamble on the stock market in teh traditional sense and therefore as he owns the property and balance sheet of his investors which always have capital value cannot blow his money in the same way, if a company colapses he still has means to recover some of an investment by breaking up the business and selling it off.
The best answer is from WEB himself. Download all the Buffet Letters from the BRK website and use Google Desktop to search for any subject. He is very straight forward about his mistakes.
I am sure he has made some bad investments just like Tiger Woods has missed some big golf shots but if you look at the career the man is one of the best investors in the world. He is also very humble about it.
Out of a large group of investors, one half would outperform the mean, and one half would underperform the mean, and there would be several who wildly outperform the mean (and several who would wildly underperform the mean). The number of such investors will decrease as time goes on (although I'm more and more convinced that the average investor underperforms the mean because most make extraordinary efforts to do so!) Without knowing very much about Buffet's track record, I would be very surprised if Buffet didn't make any mistakes (in fact, I'd rather assume he was lying if he claimed something of the sort). I'm almost positive he made plenty of wrong moves over his lifetime. Why would this surprise anyone? Bottom line for individual investors - don't try to emulate Warren Buffet. If he has 1 billion and he loses 1/2 of that, he still has 1/2 billion to play with. If you have 1 million, and you lose 1/2, there goes your retirement and your life!
Clarification added December 20, 2007:
The way an 'average' investor underperforms the mean is because the distribution is not necessarily normal, so it is possible that more investors lose money than make money on average, or in other words, more investors perform worse than the mean than beat the mean.
James C B.
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Hi Snighter,
I have heard Buffet speak many times of his errors of omission - opportunities he didn't take.
Hard to argue with 190% over 10 years and annualized returns of 43 years 22%.
JC Brandon
jcbcapital.com
Padraic H.
Principal at Siskin Technologies and Information Technology and Services Consultant, No-nonsense Application Developer
Hi Snighter,
Buffett has talked about his investment in US Airways in 1989 as one his greatest mistakes. He was attracted partly to the high dividend (as I recall). Shortly after his purchase, US Airways slashed its dividend as the company had huge losses in the early 1990's. The biography of Warren Buffett by Roger Lowenstein is an excellent resource if your are interested in Buffett.
Cheers
Padraic
