Love & Acquisitions: 5 Ways to Invest Like You’re Marrying for Life
In the 1992 Berkshire Hathaway shareholder letter, Warren Buffett wrote:
“In the search [for acquisitions], we adopt the same attitude one might find appropriate in looking for a spouse: It pays to be active, interested and open-minded, but it does not pay to be in a hurry.”
Sitting on a mountain of cash, and amidst a fury of acquisitions and leveraged buyouts of the late 1980s and early 1990s, Buffett noticed many investors buying businesses at inflated prices in hope these businesses would turn out to be cash cows. His mindset of patience, however, prescribed waiting until a good business became available at a fair price before considering it for purchase.
Having cash on hand doesn’t mean you should be in a hurry to spend. The web3 ecosystem moves quickly and investors often feel compelled to put capital to work immediately following a sale or a new deposit.
By exercising patience and diligence, investors can reap numerous benefits waiting to purchase assets until they are available at fair prices. Here are 5 strategies to employ:
- Avoiding Impulse Decisions: It’s easy to get carried away and make impulsive investment decisions when the charts are popping up and to the right. Waiting for the right opportunity to pounce however, allows savvy investors to analyze the opportunity more thoroughly, weigh risks versus rewards, and make well-informed choices based on fundamentals — not emotions.
- Quality Over Quantity: The focus should be on acquiring quality assets rather than accumulating a large number of investments quickly. By waiting for a good business at a fair price, you can build a concentrated portfolio of solid companies with strong growth prospects.
- Capitalize on Market Fluctuations: Markets are inherently cyclical, with periods of highs and lows. Take advantage of market downturns to buy great businesses at bargain prices.
- Avoiding Overvaluation: A business might be exceptional, but paying an exorbitant price can erode potential returns. You should look to buy when the valuation is reasonable, providing a solid foundation for growth.
- Embracing Contrarian Thinking: Popular businesses often come with inflated valuations due to the “herd mentality” of the market. Embrace contrarian thinking (Think Different!) to remain unfazed by short-term trends which allows you to find uncovered gems.
Remember, the market will always present attractive opportunities.
Be as patient as if you were choosing a life partner.
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- FREE SAMPLE CHAPTER: Warren Buffett in a Web3 World: Applying 60 Years of Sage Advice to Cryptocurrency, NFTs, Blockchains and More
- Blog Post: Learn How to Invest In Web3
- Blog Post: Block3 Book Club: Web3 Edition
