Warren Buffett’s most important lesson in stock market investing comes from Baseball

By: | Published: May 5, 2018 10:30 AM

Legendary stock market veteran Warren Buffett draws parallels between Baseball and stock market investing and says that the game has one of the most important lessons for investors.

Warren Buffett, American Air CEO, Wall Street, Persian Gulf airlines, Doug ParkerBillionaire investor Warren Buffett. (Reuters)

Legendary stock market veteran Warren Buffett draws parallels between Baseball and stock market investing, and says that the game has one of the most important lessons for investors.The lesson for investors, according to Warren Buffett is that you don’t have to swing at every pitch. “The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling, ‘Swing, you bum!,’ ignore them,” Warren Buffett said in n HBO’s new documentary named “Becoming Warren Buffett.”

Apart from the swing, Warren Buffett also draws parallels from the game to explain why he invests in companies within his circle of competence. “You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital,” Buffett wrote in one of his annual  letter to shareholders. “Defining what your game is — where you’re going to have an edge — is enormously important.” Referring to American professional baseball great Ted Williams’ book, “The Science of Hitting, Buffett says that if the ace sportsman waited for the pitch that was really in his sweet spot, he would bat .400. “If he had to swing at something on the lower corner, he would probably bat .235,” Buffett explains.

In an interview with CNBC, Kathy Xiaosi Gong, China’s youngest-ever national chess champion revealed her “Warren Buffett” moment. Gong had requested a dinner with Warren Buffett. Even though Warren Buffett rejected the offer, he gave her three pieces of advice. The first, -question yourself every night if you learnt something new that day. The second advice was to always answer the phone. “In life there will be so many things you want to run away from, but you should always confront them head on,” Buffet told Gong. Lastly, Warren Buffett told her to “Be humble, no matter how high you rise.” Kathy Gong, who now features in MIT’s 35 Innovators of 2017 and also co-founded WafaGames in 2017 says that in times of self-doubt, she reminds herself of the “Warren Buffett” moment.

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