One of my favorites:
99. For the penultimate lesson, let’s turn once more to Warren Buffett, who briefly said in his 2004 shareholder letter what took me 98 bullet points to say:
Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.
There have been three primary causes: first, high costs, usually because investors traded excessively or spent far too much on investment management; second, portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and third, a start-and-stop approach to the market marked by untimely entries (after an advance has been long under way) and exits (after periods of stagnation or decline). Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.
“When there’s blood in the streets, I buy.”
Also, this note on the insanity of gold as an investment, and even more so as a hedge:
62. My three strikes against gold. Strike one: Its value can’t be estimated with basic math (since it just sits around producing nothing). Strike two: Wharton professor Jeremy Siegel showed that going back to the 1800s, the return on gold has barely kept up with inflation and is left in the dust by stocks and bonds. Strike three: Gold as a doomsday investment doesn’t make much sense. If the apocalypse (financial or otherwise) actually comes, you’re probably screwed regardless.
If you’re planning for the apocalypse, don’t invest in gold, invest in lead.