How To Transfer Money From the Patient to the Impatient

Or was it the other way around?

Just a few days ago I was writing about Warren Buffett and I continue to have questions about my stand on this issue.

Warren Buffett is often referred to as the “Oracle from Omaha” because, indeed, he is from Omaha. But also, when it comes to his ability to pick stocks, he has flabergasted the world. He is incredibly adept and choosing winning companies to buy, and then hold over the long term. So much so he has earned the nickname “Oracle”.

He has been so successful, in fact, that he has become a multi-billionaire in the process.

Buffett is also full of humility about his accomplishments. He once stated…

“It is not necessary to do extraordinary things to get extraordinary results.”

— Warren Buffett.

Buffett Says Stay Away From Individual Stocks

But Buffett has often warned the rank and file members of the investing community, such as people like me, to steer away from the ownership of individual stocks.

Here is Buffett’s quote, short and sweet, from the 2021 annual Berkshire Hathaway shareholder meeting:

I do not think the average person can pick stocks.

— Warren Buffett

Buffett has long been a proponent of sticking with a market index fund as compared to buying individual stocks. He mentions that the “average Joe” kind of investor, the type of person that I openly admit that I am, should be buying the S&P 500 market in the form of a low-cost index fund.

In the same shareholder meeting Buffett said this:

“I recommend the S&P 500 index fund, and have for a long, long time to people.” — Warren Buffett

For years I have owned individual stocks — and I paid a hefty price for that mistake, which I have chronicled here. As such, I will not rehash the error. All I will say is that my portfolio at that time was full of individual stocks. And…

During the market meltdown of early 2020, I panicked and sold. I lost a lot of money with that single error that took about 5 minutes to execute.

Here is the critical reason I lost my money…

I DID NOT HAVE CONFIDENCE IN THE STOCKS I PURCHASED.

That is really the bottom line. It is so simple now that I look back on it.

Although I did do some research before purchasing these companies I did not do enough to warrant full confidence in the stock purchases I was making. When the rains began to fall, and the floodwaters began sinking my portfolio, I, in a state of what I can only refer to as a frenzied mind, began selling huge chunks of my stock holdings.

My wife was actually present when she saw me feverishly working on my computer, selling my stocks. She said I was acting completely out of character. Unfortunately, she did not know what I was doing or she might have been able to save our family a serious chunk of change. So ends a very sad tale…

But the story is not over yet. I have changed my investing methods and now almost all of my portfolio is index funds.

My Confession

And now, here is my confession.

I still have one individual stock in my portfolio.

Well, you may not think that is much of a confession, but for me it is. I have been telling people, through several posts now, to stay away from individual stocks, so here I am breaking my own rule.

My Excuse…

That does not add up to very consistent advice.

But I do have a reason for it. I have sold everything but ONE stock. Hey, really, that can’t be that bad.

To Transfer Money From The Impatient to the Patient…

I am waiting for a good time to sell, unlike what happened to me in March 2020. So I will wait a while longer. How long will I wait to purge the final stock from my portfolio, you may ask? And I will say that I will be patient before I sell.

And here is what Mr. Buffett has said about that topic…

Be Patient

“The stock market is a device for transferring money from the impatient to the patient”

— Warren Buffett

So, perhaps I am learning something. As I continue to move forward with my investing methods, I will carry on learning as I go. Most of all I am learning about my own strengths and weaknesses, and that is the best thing anyone could ever do.

I am even thinking to follow another piece of Buffett's advice as my mind begins to settle down to the serious task of making good investing decisions. And that is…

“Be fearful when others are greedy, and greedy when others are fearful.”

— Warren Buffett

I am hoping that during the next crash I will be buying and not selling.

That is enough for this post… All the best to all of you wonderful readers of mine… Max