understand their businesses and their models.” That is why Buffett avoids investing in Internet companies at the beginning of the road. Companies based on a model of number of surfers, without models of income and profits. Indeed, in the end most of these companies collapsed.
4. All to the extent
“A very wide variety is needed only when investors do not understand what they are doing,” Buffett says, and rightly so. As opposed to all the economic theories about portfolio diversification, the more diversified your portfolio is, the closer you are to the average, the closer you are to the index, meaning you actually invest in an index / index. Is that what you want? Is this what investment managers are supposed to do? No. Investment managers should produce a return by choosing good investments, and this could also be a single number of investments. Buffett has always invested in a relatively small number of companies.
5. Long-term investments
“The main idea of investing in the stock exchange is to choose shares of good companies at good prices, and to stay with the investment, as long as they are good companies.” In the same context, “When you think about investing in a stock, if you do not think of holding it for at least 10 years, do not invest more than 10 minutes in a decision.” Buffett applies this – he is not inclined to sell holdings. He invests in the long term, although from time to time he decides to realize his holdings and moves to other holdings.