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Investors Therapy #5: Every investor hates sitting on cash...until they need it, the catastrophe of success, and much more!

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Hey Tribe, When Buffet speaks you should listen. I want to highlight 2 excerpts from his annual share
 

Investors Therapy

March 17 · Issue #5 · View online
The best investors focus on improving their thinking habits before investing in the market. Investors Therapy is a monthly newsletter that covers all forms of investing and helps investors understand their psychology to make better investment decisions. If you're ready to take the next step in your investment journey, subscribe!

Hey Tribe,
When Buffet speaks you should listen. I want to highlight 2 excerpts from his annual shareholder’s letter. 


…Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need. 
…Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.
When markets are booming, we hold onto cash while feeling great shame. So we must get rid of it as soon as possible because everyone else is making so much money. Yes, losing a small percentage of money (purchasing power) hurts, but being knocked out of the game by losing all of your money is even worse. The name of the game is to stay in the game long enough so you can purchase assets that fit your criteria. No one can forecast when the corrections will happen, but you need to be in a position to act when they appear.

Look at your cash as an oxygen canister needed for climbing Everest. At the base of the mountain, everyone has oxygen canisters and some people carry less because it’s a burden to lug those heavy things along. Some expect everything to go smoothly due to excellent forecasts and expertise of their guides, so they decide to carry just enough to get them up and down the mountain within 40 days. Others know things can get rough, so they will bear the burden of carrying an extra oxygen canister incase things don’t go as planned (source: see life).
But when in you’re in the mountain’s “death zone” at 26,000 feet things change. The weather forecasts were off and now you’re suffering from a freak blizzard that extends your trip by another 10 days. You can barely breath due to the high altitude. Previously that extra oxygen tank was looked at as a burden, now it’s worth its weight in gold and you’ll thank your lucky stars you have an extra one.

 Am I saying hold all cash? No, but when you’re already heavily invested and new opportunities don’t meet your investment criteria, think twice before dropping your extra oxygen tank.

Cheers,
Jordan



A picture of me trying to understand technical analysis.
Investor Psychology
Expectations vs. Forecasts · Collaborative Fund
The Narrative Fallacy and What You Can Do About It
18 Cognitive Bias Examples Show Why Mental Mistakes Get Made
Stocks
Warren Buffets Annual Share Holder's Letter
Real Estate
Addicted to low rates, sending 2x4s, and a market update | Sacramento Appraisal Blog | Real Estate Appraiser
I've Been an Entrepreneur Since the '90s—And I Think I've Finally Found the Perfect Investment. Hear Me Out.
Careers, Society, and Personal Development
How Complex Systems Fail
Tennessee Williams – The Catastrophe of Success | Genius
Labor 2030: The Collision of Demographics, Automation and Inequality - Bain & Company
Watch/Listen
Working At one of China's Largest Factories
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