Equity investments: Where's the risk?
One of the sacred cows of modern day investing is the idea of buying, and holding, and holding! Younger investors for example, are advised to invest aggressively in equities and then hold for the next 20, or 30 years. The thinking behind this is that such investors have more time over their lifetimes to recover from dips in the market. In other words, given enough time, good returns will eventually overpower bad returns. Does this always have to be true?
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Parting Thought:
- The strategy we've adopted precludes us from following standard diversification dogma. Many pundits would therefore say our strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it. - Warren Buffett
