The Power of Yawns
July 21st
Students need only two well-taught courses—How to Value a Business, and How to Think About Market Prices. Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards—so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value. Though it’s seldom recognized, this is the exact approach.
True investing is not a pursuit of immediate applause but rather a commitment to a steady and measured strategy. The flash and dazzle of quick returns can misguide us, leading us to focus on momentary victories rather than secure, predictable growth.
The 'applause' Buffett refers to captures the allure of short-term wins, the kind often chased for the thrill of quick profit and validation from peers. The danger lies in this pursuit, where the glitter of immediate success can divert us from the steady path of long-term sustainability.
The 'yawns', conversely, characterize the slow, consistent stride of a carefully planned investment. Such decisions may not incite immediate thrill or attract attention. However, with time, they deliver stable, reliable returns, forming the strong foundation of a resilient investment portfolio.
Such a perspective calls for a revaluation of our focus — away from the applause and onto the yawns, favoring enduring success over momentary excitement. After all, in the realm of investing, and indeed in life, it's often the quiet, persistent effort that proves to be the most rewarding.
Copyright © 2023 by Scott Sansovich