4 ms·

Buying a lot of things is what you do when you don't know what you're doing. If you can identify which stuff is the good stuff, why buy the bad stuff?

• seanhunter 2y ago
  Like lots of Buffett and Munger's folksy takes on investing that sounds like it makes sense but actually deserves some scrutiny. Clearly in some sort of idealized market if you have infinite risk tolerance and you are really certain you would put all your money into your best idea and that will give the best return. In real markets investment ideas/trades/strategies have a finite capacity which is the amount of capital you can deploy before the opportunity shuts down (if nothing else because of the distortive effect of the money you have already put into it). So normally investors are forced to diversify once they have a certain amount of capital simply because it's the only way they can get their captial into play and earning some sort of return. Berkshire choose not to do it which is why they have such a massive amount in cash sitting around doing nothing. So it's not like their idea is wrong as such it's just that they aren't 100% upfront about the downside of their way of doing things - they can only take really massive trades. There are only so many of those which limits the quality of opportunities they have, and even there they can't deploy all their capital so their rate of return suffers because they have a lot of cash on the sidelines. That's at least partly why their returns (although excellent on an absolute basis) are so much lower now than they were in the 80s for example - they are too big now and they can't get all their capital to work.
  • bdjsiqoocwk 2y ago
    So what? I'd rather have cash in the bank and have a lower rate of return, than putting it into equities I'm not so sure about...