October 26, 2015

What will happen is more important than when it will happen - Warren Buffet

This year, a lot of Warren Buffet's stocks have grossly under performed the US market. Walmart down 30%, then Procter & Gamble and American Express with losses of 18% and 17% respectively.

Warren’s other favourite stocks like IBM, Wells Fargo, Bancorp, Goldman Sachs, Coca-Cola, etc have also put up a poor show in 2015.

Now, the important question is why Warren Buffett is hanging on to the losing stocks.

The answer is to be found in an old lecture that Warren Buffett gave to a group of students.

In this classic lecture, which is worth its weight in gold, Warren emphasized that if we buy a “wonderful business”, we can figure out “what” will happen though we can’t figure out “when” it will happen. His immortal words are:

“That factor so overrides anything else. If you’re right about the business, you’ll make a lot of money … the timing part of it is a very tricky thing. I don’t worry about any given event if I have a wonderful business … With a wonderful business, you can figure out what will happen, you cannot figure out when it will happen. You don’t want to focus too much on “when”, you want to focus on “what”. If you’re right about “what”, you don’t have to worry about “when” very much”.

Nobody can dispute that each of the losing stocks in Warren Buffett’s portfolio is a “wonderful business” in its own right and that they will have their day in the sun, sooner or later.

So, the next time you feel upset at the underperforming “dogs” in your portfolio, check whether the business is “wonderful” or not. If it is, then prepare to wait patiently. You will be handsomely rewarded!

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