We will prosper or suffer in controlled investments in relation to the operating performances of our businesses - we will not attempt to profit by playing various games in the securities markets.
A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting.
If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record? Or be thought of as the world's worst investor when you were actually the best?
We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and
businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.
We have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.
Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.
A diamond cannot be polished without friction, nor a person perfected without trials. Someone is enjoying shade today because someone planted a tree a long time ago.
AIG would be doing fine today. It was one of the ten largest companies in the United States in terms of market value, over 200 billion, the most respected insurer and everything in the world.
Investors have to remember: corporate profits are going up, but stocks are going up faster. How can that continue indefinitely? Investors can only earn what companies themselves can earn; the government or the markets themselves don't kick anything in. How can you get anything more out of a farm than what it grows?
Nevertheless, as circumstances presently appear, I feel substantially greater size is more likely to harm future results than to help them. This might not be true for my own personal results, but it is likely to be true for your results.
If you invested in a very low cost index fund - where you don't put the money in at one time, but average in over 10 years -you'll do better than 90% of people who start investing at the same time.