In his annual letter to shareholders in February, Buffett warned that the new reporting rule would produce some "truly wild and capricious swings." He also noted that "gyrations of that magnitude will swamp the truly important numbers that describe our performance."
In a statement accompanying today's earnings report, Buffett, the firm's chairman and CEO, urged investors to focus on Berkshire's operating businesses and not earnings results based on fluctuations in its nearly $173 billion stock portfolio. He says the stock portfolio can see fluctuations of up to $10 billion in any given quarter.
Focus on operating business i.e operating income and not volatility in investment value.
Warren Buffer is business owner investor while most of us are retail investor as either employee or self-employed owning a job.
Business owner can focus on operating income or business and can ignore paper losses without feeling very bad!
How about us?
Business owners: Business operating income and investment portfolio
Job owners: Earned income and investment portfolio
Can we really focus on earned income after tax and ignore paper losses in our investment portfolio?
Inject monthly capital into our investment portfolio while sitting on large paper losses and receiving dividends as Panadols and still feeling great as investor?
Focus on earned income and don't bother with paper losses due to market volality
Wah!
Steady man!
Posts
;)
ReplyDeleteUncle8888,
ReplyDeleteThat's the conventional advice ... which i followed all the way thru -45% drawdown from Oct07 to Mar09. Lol!
By then no more job owner so just hang on & collect panadols lah. Luckily got enuf panadols to pump xtra into cheap equities.
Thanks to Ben Bernanke & Tim Geithner, recovered back to the original highs by mid 2012. Not a fun experience :)
Actually for those in their 20s or early 30s, this method is quite workable.
E.g. backtest for annual DCA of STI ETF from 2002 till today.
Even better if use global stocks ETF as the investor won't be trapped by any lengthy underperforming single country or region.
Spur😃
20s can take note. :-)
DeleteDuring good times, retirees should be pre funding their cash account. Can't wait till want to pang sai then look for toilet.
ReplyDeleteFor long term buy & hold, i think better to be simply global diversified stocks.
ReplyDeleteSectors & single country requires high level of smarts and insight to forecast which will outperform next year etc.
The only single country etf that may be acceptable will be US total market etf as the few thousand companies will be diversified & globalised enough. But you'll still be missing out on fast growing, innovative companies in Asia & emerging markets.
To avoid bad sequence of returns risk, 4-5 years before targeted retirement, to harvest cash equivalent to 4-6 years' worth of living expenses.
Harvesting can be done whenever Mr Market becomes euphoric. As well as setting aside some portion from regular dividends.
Spur😃