道德经 第九章
持而盈之 不如其已
揣而棁之 不可长保
金玉满堂 莫之能守
富贵而骄 自遗其咎
功遂身退 天之道
[译]
Holding it to the fullest is not as good as giving it up in time.
Sharpening it to the sharpest cannot be kept for long.
Gold-and-jade-filled houses in no way can be defended.
Over-pride in wealth and status will lay troubles for the future.
Returning home after achieving success is naturally Tao.
[注]
Warren Buffett once said he was taking the last puff when he bought the Berkshire Hathaway when it was a textile company. After his first success, he never bought another company that way. Did Warren Buffet study the Tao before he changed his investment philosophy? I have no way to find it out. Almost all his long-term holdings are average companies. There is no splendid value in any of his holdings. Yet he has been proven the best investor in the world. So I know his success is due to his intuitive understanding of the Tao if he has never learned the Tao.
Based on my current understanding of Buffett investing philosophy, he has two basic principles. One is the margin of safety. Another is the enduring value. He can concentrate on only a few holdings because there is a margin of safety when purchasing a new stock. He can hold his investments for a long time because there is enduring value of the companies he holds. He has even gone over his way by saying that he likes the company a fool can run well. The enduring value comes from the imperfectness and improvability of the company. In other words, the company is run by people far from the sharpest. So the distance of the company from its perfect shape is the source of enduring value.
In similar ways, one can examine the principle of Tao is applied to the margin of safety. By admitting the imperfect understanding of the company when purchasing a stock, the margin of safety is built in the system at the very beginning. If investors are over-pride in his calculations for investing, they are only lay troubles for their future. By admitting the potential calculation errors, investors can eliminate laying troubles for themselves.
It is simply the law of large numbers that one can only beat the market by holding a very small number of stocks. When the number of holding stocks is large, the statistical law of the average takes over the extreme events. In statistics, the standard error of an estimate is inversely proportional to the square root of the number of samples. The father of value investing Benjamin Graham recommended committing at least 25% of your net worth in the stock you like the best. If one follows his recommendation, he should only hold four stocks. When you look at Buffet holdings, most of his investments are indeed concentrated on four to five stocks. The possible danger of holding only a handful of stocks is gaining a return much below the market return. So there are only a few really practice what Graham did and Buffett have done.
For the average investors, diversification is the only way out without gambling his sweat money. So in a way, the Tao is applicable to the extreme smart investors and the average investors as well.
Holding a stock until its potential gain reaching the maximum is not as good as giving it up early enough so that other investors have some further potential to harvest. So the Tao is applicable to stock investing even today. Buying low and selling high expresses the exactly same feeling as returning home after achieving success.
揣而棁之 不可长保
金玉满堂 莫之能守
富贵而骄 自遗其咎
功遂身退 天之道
[译]
Holding it to the fullest is not as good as giving it up in time.
Sharpening it to the sharpest cannot be kept for long.
Gold-and-jade-filled houses in no way can be defended.
Over-pride in wealth and status will lay troubles for the future.
Returning home after achieving success is naturally Tao.
[注]
Warren Buffett once said he was taking the last puff when he bought the Berkshire Hathaway when it was a textile company. After his first success, he never bought another company that way. Did Warren Buffet study the Tao before he changed his investment philosophy? I have no way to find it out. Almost all his long-term holdings are average companies. There is no splendid value in any of his holdings. Yet he has been proven the best investor in the world. So I know his success is due to his intuitive understanding of the Tao if he has never learned the Tao.
Based on my current understanding of Buffett investing philosophy, he has two basic principles. One is the margin of safety. Another is the enduring value. He can concentrate on only a few holdings because there is a margin of safety when purchasing a new stock. He can hold his investments for a long time because there is enduring value of the companies he holds. He has even gone over his way by saying that he likes the company a fool can run well. The enduring value comes from the imperfectness and improvability of the company. In other words, the company is run by people far from the sharpest. So the distance of the company from its perfect shape is the source of enduring value.
In similar ways, one can examine the principle of Tao is applied to the margin of safety. By admitting the imperfect understanding of the company when purchasing a stock, the margin of safety is built in the system at the very beginning. If investors are over-pride in his calculations for investing, they are only lay troubles for their future. By admitting the potential calculation errors, investors can eliminate laying troubles for themselves.
It is simply the law of large numbers that one can only beat the market by holding a very small number of stocks. When the number of holding stocks is large, the statistical law of the average takes over the extreme events. In statistics, the standard error of an estimate is inversely proportional to the square root of the number of samples. The father of value investing Benjamin Graham recommended committing at least 25% of your net worth in the stock you like the best. If one follows his recommendation, he should only hold four stocks. When you look at Buffet holdings, most of his investments are indeed concentrated on four to five stocks. The possible danger of holding only a handful of stocks is gaining a return much below the market return. So there are only a few really practice what Graham did and Buffett have done.
For the average investors, diversification is the only way out without gambling his sweat money. So in a way, the Tao is applicable to the extreme smart investors and the average investors as well.
Holding a stock until its potential gain reaching the maximum is not as good as giving it up early enough so that other investors have some further potential to harvest. So the Tao is applicable to stock investing even today. Buying low and selling high expresses the exactly same feeling as returning home after achieving success.
posted by Unknown at 10:37 PM
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