Tuesday, December 3, 2019

Warren Buffett once proposed a Fourth Law of Motion to explain the pitfalls of active management

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Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing. He lost a bundle in the South Sea Bubble, explaining later, he said  'I can calculate the movement of the stars, but not the madness of men.'


If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion which would have been " For investors as a whole, returns decrease as motion increases ".

Yes. Simply put it means that lot of activity of buying -selling-buying-selling  will only decrease your wealth since you end up paying Brokerage, Capital gains tax , and Consultancy fees and other taxes.

Instead , Buy a good stock and stay put. 

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