“In the short term, the market is a popularity contest. In the long term, a market is a weighing machine.”
One of Warren Buffett’s major strategies is to make sure the stocks are not expensive. For example, he may not invest in something like Google given their outrageous stock prices now. A market is a weighing machine because you have to snatch up your investment when it is the right time, and not before.
“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
The price is the price but the price is what you pay, and value is what you get. Quality stocks are those that are not as expensive as you may think they need to be. These stocks will grow while the expensive stock may be lost.
“Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.” If a portfolio is all tech stock, this is not diversified. The portfolio has to include other forms of stock, but a portfolio including both stocks and bonds may or may not be sufficiently diversified.
“I am a better investor because I am a businessman, and a better businessman because I am an investor.” Buffett believes he is a better investor because he has studied business, and a better business because he has studied investing. Portfolios may require paying attention to bonds of many kinds. Buffett is very careful with his long-term investment strategies as he is pragmatic with his common sense strategic investing maneuvers Buffett remarks that his favorite holding period is “forever” which is how he has come to own stock in Dairy Queen and Coca-Cola.