If you look at the mistakes that investors commonly make, one is not truly understanding their investment, and another is leveraging a poorly understood investment through borrowing. Combining those two, as Warren Buffett points out, usually means that investors are really heading for trouble.
“Any time you combine ignorance and borrowed money, you can get some pretty interesting consequences,” Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “The ability to borrow enormous amounts of money combined with a chance to get either very rich or very poor very quickly, has historically been a recipe for trouble at some point.”
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© 2022 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.