The optimum portfolio depends on the various expectations of choices available and the degree of variance in performance which is tolerable. The greater the number of selections, the less will be the average year-to-year variation in actual versus expected results. Also, the lower will be the expected results, assuming different choices have different expectations of performance.
...I will give you two pieces of advice. Invest as much in yourself as you can; you are your own best asset by far. Then follow your passion; you want to be really excited to get out of bed every morning.
With a wonderful business, you can figure out what will happen; you can't figure out when it will happen. You don't want to focus on when, you want to focus on what. If you're right about what, you don't have to worry about when
Most business mistakes are irreversible setbacks, but you get another chance. There are two things in life that you don't get another chance at - marrying the wrong person and what you do with your children.
Risk comes from not knowing what you are doing so wide diversification is only required when investors are ignorant. You only have to do a very few things in your life so long as you don't do too many things wrong.
Our marketable equities tell us by their operating results - not by their daily, or even yearly, price quotations - whether our investments are successful. The market may ignore business success for a while, but eventually will confirm it.
I don't need 15 houses. Owning real estate doesn't mean much to me. I don't like to think about things like that. I don't need 12 boats, or even the world's largest boat with a crew of 80. I'd have to take care of them, to worry about them. I get a lot more fun out of life without all the bells and whistles.
Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it's the lack of change that appeals to me. I don't think it is going to be hurt by the Internet. That's the kind of business I like.
The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball.
In the end, alchemy, whether it is metallurgical or financial, fails. A base business can not be transformed into a golden business by tricks of accounting or capital structure. The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.
There's not many businesses where someone can come in and offer to cut the price in half and somebody doesn't think about shifting. But that's the nature of the ratings business.
Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.