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Warren Buffett's advice on this is simple. If he doesn't understand it, he doesn't invest. No matter what the rest of the world thinks. He famously missed th
by btilly 8y ago
Warren Buffett's advice on this is simple. If he doesn't understand it, he doesn't invest. No matter what the rest of the world thinks.
He famously missed the dot com boom. And in the middle of it, gave a private speech about exactly why, about how few of those companies were likely to be around in a few years even if the internet were exactly as successful as hoped for.
He was widely derided as being behind the times, out of date, and so on for a couple of years. But looking back now, he looks prescient.
If you are a value investor and don't understand how to value it, don't invest.
- bunderbunder 8y agoAnd it's not like he just flat out didn't invest all the money he wasn't putting into Geocities and Lycos. He was just putting it into other things, mostly stuff that was less the hot new thing, and therefore less in demand, and therefore more favorably priced. I don't think he regrets his conservatism. From 1990 through now, BRK.A is up 4,200%, while the NASDAQ composite is up only 1,500%.
- btilly 8y agoNo, he doesn't. But as https://alphaarchitect.com/2016/10/10/value-investing-got-crushed-during-the-internet-bubble-heres-why/ https://alphaarchitect.com/2016/10/10/value-investing-got-cr... points out, it looked rather different when Berkshire lost 44% while the NASDAQ gained 145%. Buffett stood by the strength of his reasoning. But the rest of the world didn't.
- mlthoughts2018 8y agoUntil some years later when it did...
- solatic 8y agoThe way to reconcile this is to compare it to poker - the way to gauge your performance is not by the final outcomes, but by how good your decisions were. Worrying about missing the boat on exceptional investments like Facebook and Google is irrational if your overall investment strategy is sound. It's just not worth it to second-guess yourself for folding pre-flop if your hand only turned into a winner on the river.