The Most Difficult Part of Investing

I’ve been investing some money for a few years now. One thing I noticed though is how it is a kind of character building if you follow Buffett’s strategy.

If you follow Value Investing, you basically estimate a company’s fair value and then decide whether you decide to buy or not based on that. After this point, the crowd may be ignoring you, going with you, or going against you. The stock will jump up and down each day. And somehow you just have to sit there and take the psychological beatings. If the price goes up, you have to remind yourself that that doesn’t guarantee you were right. If the price goes down you have to look through your reasoning again and hopefully you realize that your reasoning still holds. If not, you have to learn from it.

And you have to do this day in and day out. If you sell in panic, you’ve made a mistake which might have long-lasting consequences. If you buy in an euphoric moment, you’ve made a mistake which might have long-lasting consequences as well.

So just like life, you have to be very careful. One mistake can have dramatic consequences.