No. of Recommendations: 6
There was a poster saying they'd consider a 5% Berkshire allocation with play money. Maybe even 7%, because it was Berkshire. That got a chuckle out of me. That Berkshire gets a whole extra 2%.
From Morgan Housel, "The Psychology of Money":
(Thanks for that book tip from somebody here!)
Charlie, Warren, and Rick were equally skilled at getting wealthy. But Warren and Charlie had the added skill of staying wealthy. Which, over time, is the skill that matters most.
Nassim Taleb put it this way: “Having an ‘edge’ and surviving are two different things: the first requires the second. You need to avoid ruin. At all costs.”
Applying the survival mindset to the real world comes down to appreciating three things.
1. More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.
I don't think putting all your nest eggs into Berkshire fits that "survival mindset". You might think Berkshire is "unbreakable", but:
A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality. A good plan doesn’t pretend this weren’t true; it embraces it and emphasizes room for error.
Putting the majority of one's savings in Berkshire does not leave room for error, does not acknowledge that the future is unknown.
(Disclaimer: I am one of the worst sinners.)
