Download - Allegheny County Medical Society

FINANCIAL
the faintest idea what the stock market is going to do in
the next six months, or the next year or the next two.”
Your best strategy is to always remain fully invested
because the market’s direction is unpredictable.
Buffett believes if you are not willing to own a stock
for 10 years, you should not own it for 10 minutes
(1996). In 1987, he ignores the conventional Wall Street
wisdom that, “You can’t go broke taking a profit,” by
holding securities indefinitely if the expected return on
capital, valuation and management are all satisfactory.
He postulated a Fourth Law of Motion, “For investors as
a whole, returns decrease as motion increases” (2005).
You can minimize trading by owning broad-based index
funds that only need to be sold for rebalancing or
liquidation purposes.
The 2005-2006 annual reports introduced the
fictional wealthy “Gotrocks” family, whose members
attempted to become wealthier by trading shares of
stock with each other. They hired brokers, money
managers, consultants, planners, hedge funds and
private equity consultants to advise them. These “helpers”
consumed 20 percent of the family’s earnings and
transformed the “Gotrocks” into the “Hadrocks” family.
Buffett observed, “When someone with experience
proposes a deal to someone with money, too often the
fellow with money ends up with experience and the
fellow with experience ends up with the money.” Calculate
your own investment costs and work to reduce them
to less than 0.2 percent annually.
Finally, Buffett emphasizes that investors need to do
few things right if costly mistakes can be avoided
(1992). “Know nothing” investors can actually outperform
most investment professionals by periodically
investing in low cost, diversified index funds (1993). In
1993 he observed, “When dumb money acknowledges
its limitations, it ceases to be dumb.”
“Buff” up your portfolio and convert your savings
into “smart” money by investing in diversified, low-cost
index funds providing solid market returns.
○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
○
Dr. Weinstein, a retired oculoplastic surgeon, teaches investing for
Carnegie Mellon University’s Osher program and has co-authored a
retirement planning chapter in J.K. Lasser’s Expert Financial Planning.
Dr. Weinstein also serves as associate editor of the ACMS
Bulletin. He can be reached at weinstein.gary@gmail.com.
April 2012 : Bulletin
163