Numbers Don't Lie

Sunday, January 29, 2006

The dumbest reason to buy a stock

When shopping, we all look for values; but when buying stocks, 90% of us, estimated by author and investor Robert Kiyosaki, invest for stocks' price movement, not value.

In case you haven't heard before, let me write down here what Warren Buffett once said: "The dumbest reason in the world to buy a stock is because it's going up."



Anonymous Anonymous said...

That's the dumbest quote in the world. Buffett built his fortune in a time when stocks were undervalued because nobody wanted them. It was a cheap asset class.

You could buy anything in the late 90s just because it was going up and you would make money. Quote shot down.

And I know many "value" investors who were wiped out in 2000-2002 because they didn't pay attention to where the MARKET PRICE was going. They looked at the ticker that said $12 and said "But it's worth $50!!" Idiots.

8:50 AM

Blogger McRubble said...

I disagree with "anony". Buffett didn't just build his fortune in the last 15 years. He has been practicing Edward Graham value investing since the late 50's when he studied under him.
Most people that invest in the market for the short term end up losing money because of their impatience. If you buy a wide range of stocks as most mutual funds do and invest for ten years or more you will have an approximate return of 9 % annually after taxes.
Since 1960 Warren Buffett's co-investors have experienced an overall 42 % annual return although Buffett uses more investment "tricks" than available to the rest of us..e.g. using a corporation classified as a textile company (which entitles it to different tax considerations than other types of companies)as a primary investment vehicle.

8:45 PM


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