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Warren Buffett: Stay with simple propositions

March 06, 2005

Warren Buffett had a failed investment in 2004, as stated in his annual letter to shareholders just released. This investment was a zinc extraction project, which was not simple enough. As written by Warren Buffett, the failure here illustrates the importance of a guideline stay with simple propositions that he usually applies in investments as well as operations. Warren Buffett also commented on the mistakes that a lot of investors make: first, high costs, usually because investors traded excessively or spent far too much on investment management; second, portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and third, a start-and-stop approach to the market marked by untimely entries (after an advance has been long underway) and exits (after periods of stagnation or decline). Investors should remember that excitement and expenses are their enemies. He has $41 billion in cash


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