Asked on 13 May 2020
If the price of the company keeps going up, you earn higher returns.
If the price of the company remains the same, you get a growing for the same price.
If the price of the company goes down, you get a growing company for a cheaper price.
Cash is too much of a drag on overall returns.
W.B.'s strategy could be flawed,
he trails the SP 500 over 5 years and over 10 years currently,
evidencing maybe one more time, that neither stock picking nor market timing are
possible over long term.
Warren Buffett would arguably have done better if he were willing to pay up for good companies - He had always been willing to pay a slight premium for a good company (one with a deep moat", which is the rationale for his famous quote " It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
But whether he can identify enough good companies within his "circle of competence" is a different story
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