If there is one thing Warren Buffett is clear about, it is that gambling type of behavior, whether it is in the stock market or just buying a lottery ticket, will lead an investor astray. And, as opportunities to speculate look ever more enticing, it’s most important to remember that just because you can gamble doesn’t mean that you should.
“People win lotteries every day, but there’s no reason to have that effect you at all. You shouldn’t be jealous about it,” Buffett said at the 2016 Berkshire Hathaway Annual Meeting. “If they want to do mathematically unsound things, and one of them occasionally gets lucky, and they put the one person on television, and the million that contributed to the winnings, with the big slice taken out for the state, you know, don’t get on, it’s nothing to worry about. Just, all you have to do is figure out what makes sense…When you buy a stock, you get yourself in the mental frame of mind that you’re buying a business, and if you don’t look at a quote on it for five years, that’s fine. You don’t get a quote on your farm every day or every week or every month. You don’t get it on your apartment house, if you own one. If you own a McDonald’s franchise, you don’t get a quote every day. You know, you want to look at your stocks as businesses, and think about their performance as businesses. Think about what you pay for them, as you would think about buying a business, and let the rest of the world go its own way. You don’t want to get into a stupid game just because it’s available.”
Buffett’s full explanation about lotteries and markets
© 2021 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.