Buffett, Baseball and Patience
What does Warren Buffett, baseball and patience have to do with one another? It is how the small-town billionaire made his fortune.
Being a big baseball fan, Buffett compares his investment philosophy to the wisdom he picked up from his favorite past time sport and his hero, Ted Williams. He told CNBC, “What’s nice about investing is you don’t have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel and you don’t have to swing. No umpire is going to call you out. You can wait for the pitch you want.”
Just like Ted Williams, Buffett has been know to be very patient as he studies the opportunities and waits for the perfect moment. Then, when he receives the perfect pitch, he bets big. As Buffett has said in the past, “Don’t swing a lot, but if you do swing, swing for the fences.”
And he generally does bet big. According to U.S. News, his top 10 stock picks account for 90 percent of his publicly traded portfolio. When you are talking about well over $40 billion, those are some pretty high stakes by most portfolio manager’s standards, who generally own 150 or more different stocks in their portfolio. Buffett’s explains his thought process by quoting Ted Williams, “To be a good hitter, you’ve got to get a good ball to hit.” When you invest, you should be totally confident that you have a winning bet that will be a home run. Otherwise, you will strike out big.
Buffett has been known to be an incredibly patient investor, which has made him exceptionally successful. While he constantly pours through annual reports to find great pitches, he finds nothing wrong with holding onto his cash until the right opportunity presents itself. As long as money is being held in order to have purchasing power when the time is right, that is an acceptable part of an overall investment strategy. As he states, having cash will allow you to, “be greedy when others are fearful and fearful when others are greedy.”
Millionaire Money Habit: Investment opportunities will always present themselves. Resist wanting to invest in everything that seems like a good idea. Over-diversification will impede your ability to understand and manage all of your investments and can cost you more money in fees. Keeping cash on the sidelines to be prepared for the right moment is a suitable money management strategy. Play like Buffett and patiently wait for the perfect pitch.