Investing is often described as the process of laying out money now in the expectation of receiving more money in the future.
At Berkshire we take a more demanding approach, defining investing as
- the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future.
- More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.
- Assets can fluctuate greatly in price and not be risky as long as they are reasonably certain to deliver increased purchasing power over their holding period.
- And as we will see, a non-fluctuating asset can be laden with risk.
Investment possibilities are both many and varied.