Friday, December 17, 2010

Nobody's Perfect... Not Even Warren Buffett

This past week I wrote an article comparing active investing and passive investing where I pointed out that even the most famous active investor, Warren Buffett, is a rare exception and not the rule.  Well, it turns out that even Mr. Buffett makes mistakes when it comes to stock picking.  An article in TheStreet.com reports that in his most recent letter to shareholders, Mr. Buffett admits to several recent investment mistakes.  Regarding his investment in ConocoPhillips, Mr. Buffett says the following:

"The terrible timing of my purchase has cost Berkshire several billion dollars."

The interesting thing is that he invested in this oil company when oil prices were at their height.  So much for being able to time the market!

The article also says that he admits to making a mistake in investing in two Irish banks which appeared cheap but which caused him to lose 89% of his original investment.  Mr. Buffett says, "The tennis crowd would call my mistakes 'unforced errors'."

This just goes to show that even Warren Buffett, with all of this advantages, can't predict the stock market reliably all the time.  What hope do you or I have when we have about 1% of the time, 1% of the resources, and 1% of the skill of Mr. Buffett?

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