Warren Buffett reminds investors that there is no special award for the degree of difficulty of an investing strategy. And, according to Buffett, in the end it is the execution of an investing strategy that is the most important thing.
“This is not like Olympic diving. In Olympic diving, you know, they have a degree of difficulty factor. And if you can do some very difficult dive, the payoff is greater if you do it well than if you do some very simple dive. That’s not true in investments,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “You get paid just as well for the most simple dive, as long as you execute it all right. And there’s no reason to try those three-and-a-halves when you get paid just as well for just diving off the side of the pool and going in cleanly. So we look for one-foot bars to step over rather than seven-foot or eight-foot bars to try and set some Olympic record by jumping over. And it’s very nice, because you get paid just as well for the one-foot bars.”
Buffett’s full explanation on degree of difficulty versus reward in investing
© 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.