The Warren Buffett Quote That Might Change Your Life

“In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” — Warren Buffett, 1988 Berkshire Hathaway Letter to Shareholders

You might have read this quote before. It’s cited a lot. People often use this quote to promote the idea that you should buy a stock and hold forever.

This is particularly true in the dividend community. Investors often hold onto a dividend payer because they are getting “paid to wait.”

What’s often left out is the next sentence which is far more important.

“We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds.” — Warren Buffett, 1988 Berkshire Hathaway Letter to Shareholders

This second sentence seems to contradict the first. He’s saying that most investors are quick to take profits on high-flying stocks, while they hang onto losing businesses too long.

In other words, he’s advocating NOT selling a stock just because it’s been doing so well. He’s also advocating TO sell a stock that has been doing poorly.

This is contrary to most of what everyone seems to think about Warren. Doesn’t this guy love to buy stocks after they’ve done poorly? Read More »

The Problem with Dividend Investing

Today, I’m reviewing an article written by Mr. Tako called “The Problem with Dividend Investing”.  If you want to read it, check it out here.

This is a well-written article with some really sound advice.  If you manage your own portfolio, this post is particularly applicable to you.

Here were my three main take aways:

#1: A Real-Life Example of Dividends = Financial Freedom

The author (“Mr. Tako”) lives entirely off of the income produced by his investment portfolio.  He is a real-life example of how dividend investing can be such a powerful strategy for achieving financial freedom without worrying about market ups and downs.

#2: There Is No Such Thing as Buy and Hold

A strong company today may not be the same in three years. Read More »