As we go through this volatility and near madness in the equity markets triggered by mortgage crisis - further enhanced by hedge funds; I thought it would be good to go back and read what Warren Buffett said on this topic. And unlike my other posts, where I pontificate - I will simply quote Warren Buffett (comments added by me in italics):
How to Minimize Investment Returns (and what value hedge funds add!)Read the full post here.
It’s been an easy matter for Berkshire and other owners of American equities to prosper over the years. Between December 31, 1899 and December 31, 1999, to give a really long-term example, the Dow rose from 66 to 11,497. (Guess what annual growth rate is required to produce this result; the surprising answer is at the end of this section.) This huge rise came about for a simple reason: Over the century
American businesses did extraordinarily well and investors rode the wave of their prosperity. Businesses continue to do well. But now shareholders, through a series of self-inflicted wounds, are in a major way cutting the returns they will realize from their investments.