Yes, you don’t need to be a genius to make money in the stock market. What you do need is emotional stability. And I take that to mean, in large part, patience and a lack of greed. If you’re patient and pick your spots, buy when the stock market is correcting, say due to some black swan type of event, like an oil spill or an earthquake, you can make quite a bit of money. If you bought stocks after the housing collapse you saw your stocks double and triple. This question comes from when Buffett was speaking to some MBA students from the Richard Ivey School of Business.
Question: The key to your early career was essential information arbitrage. Given the changes in the world and that information now moves at the speed of light, how do you continue to have such great successes? The market fluctuates, that’s guaranteed. Why not wait for a pull back if you want to buy a certain stock? There’s no need to rush.
Perhaps the central idea of investing his you need to have money to make money. True. But maybe even more important is you have to NOT need the money in order to make money. If you don’t NEED the money then you can have the patience to wait until your stock doubles or triples. What if you sold Apple at $200 because you needed the money? Sure, having money and needing money might pretty much the same idea, but one aspect centers around have the strength to stick to your plan and not sell too early.
Buffett: People have better information now, but they still act irrationally … Sometimes you have to work a little bit hard to get the good deals. And looking through the Korean stock manuals I’ve found some of these same opportunities today. But ultimately, the key to success is emotional stability. You don’t need a high IQ to get rich.
Sure, Buffett has plenty of money to invest, so he can come in and buy Goldman Sachs or Bank of America when those banks are desperate for his support, but you as a small investor can have the emotional stability to wait for the right opportunities to invest, too.