Berkshire Hathaway Inc (BRK.A)

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"Buffett: Mistakes of Omission Are More Costly Than Bad Investments"

The best time to sell?

"Buffett's answer to this complex question was simple. He stated that the best time to sell an investment was "if you need money for something else."


Buffett gave this answer because he believed that the most significant mistakes he has made over the years are not bad investments, but "mistakes of omission." These mistakes don't show up in Berkshire's investment returns, but they are a genuine opportunity cost for the group and its investors.

Buffett's right-hand man and vice-chairman of Berkshire, Charlie Munger (Trades, Portfolio), elaborated on this topic at the group's 2001 annual shareholder meeting, saying, "The mistakes that have been most extreme in Berkshire's history are mistakes of omission. They don't show up in our figures. They show up in opportunity costs."

Munger went on to give an example:

"I don't like mentioning the specific companies, because the -- you know, we may, in due course, want to buy them again and have an opportunity to do so at our price. But practically everywhere in life, and in corporate life, too, what really costs, in comparison with what easily might have been, are the blown opportunities. I mean, it just -- it's an awesome amount of money. When I was somewhat younger, I was offered 300 shares of Belridge Oil. Any idiot could've told there was no possibility of losing money, and a large possibility of making money. I bought it. The guy called me back three days later, and offered me 1,500 more shares. But this time, I had to sell something to buy the damn Belridge Oil. That mistake, if you traced it through, has cost me $200 million. And I -- it was all because I had to go to a slight inconvenience and sell something. Berkshire does that kind of thing, too. We never get over it."

Buffett gave this answer because he believed that the most significant mistakes he has made over the years are not bad investments, but "mistakes of omission." These mistakes don't show up in Berkshire's investment returns, but they are a genuine opportunity cost for the group and its investors.

Buffett's right-hand man and vice-chairman of Berkshire, Charlie Munger (Trades, Portfolio), elaborated on this topic at the group's 2001 annual shareholder meeting, saying, "The mistakes that have been most extreme in Berkshire's history are mistakes of omission. They don't show up in our figures. They show up in opportunity costs."

https://finance.yahoo.com/news/warren-buffett-mistakes-omission-more-173251407.html