Do You Think Like Warren Buffett And Benjamin Graham?
I recently finished the mammoth book “The Snowball” – the biography of Warren Buffett, written by Alice Schroeder.
I bought this book around 6 or 7 years ago, but I just managed to read it now in 2023. So out of curiosity I viewed some of the negative reviews on Amazon. Most people disliked the “irrelevant and boring stories” and that you allegedly get no insights. Ha ha, this is so not true! Poor people!
The world is full of claims, promises and visions — either explicit or implicit. We better be able to navigate through this noise in order to make good decisions. One way we could do this is by pure belief: We see a commercial that shows how a lotion is effective against dry skin. The actors in the commercial are the only reference we have, so when we buy it, we do this out of pure belief.
The internet is full of questions and advice concerning the right ETF mixes in relation to saving rate and time frame.
The discussions usually go like this: “I’m X years old, have such and such ETFs at the moment with Y savings-rate in my portfolio, and expect to die at the age of Z.
Am I doing the right things (ETF choices and saving rate)? Will the money last? Which ETFs should I hold, which one sell? Etc.”
Besides ETF’s, these type of questions can be find with all other assets as well.
But to me, this approach is not ideal, however, it indicates the typical beginner’s discussion.
There is this current dilemma of how to invest in stormy times (well, it is not a current dilemma, but according to the last 20 years it may look like one).
Financial theory says that in order to take great rewards you have to take great risks. Or to put in other words: Rewards are the compensation for taking risks. However, risk is subjective, not objective. The interesting question is therefore, if we can make „risk“ an objective matter that we can then implement into our portfolio strategy.
Let’s start with risk: We can say that risk means that there is a possibility we will have less liquidity at any given time than you originally expected from our investments. (There are of course a bunch of different types of risk which we will cover some other time – if you are interested…). But in genereal it is the potential for loss, and the scope of that loss.
It is becoming more and more common to look for deeper meanings before starting to do something. Even in finances.
Why are you doing it? – Because I want to make amount X.
And why do you want to make amount X? – To travel the world, to help my kids, etc.
Why do you want to travel the world? – …
I recently finished the book „The Richest Man in Babylon” by George S. Clason. Yes, although it’s a classic, I never managed to read it earlier. But now I’m glad I did. Why?
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