The Rip Van Winkle Style of Investing (1989 年巴菲特致股東信)

 Because of the way the tax law works, the Rip Van Winkle style of investing that we favor-if successful-had an important mathematical edge over a more frenzied approach. Let’s look at an extreme comparison.

Imagine that Berkshires had only $1, which we put in a security that double by yearend and was then sold. Imagine further that we used the after-tax proceeds t repeat this process in each of the next 19 years, scoring a double each time. At the end of 20 years, the 34% capital gains tax that we would have paid on the profits from each sale would have delivered about $13,000 to the government and we would be left with about $25,250. Not bad. If , however, we made a single fantastic investment that itself doubled 20 times during the 20 years, our dollar would grow to $1,048,576. Were we then to cash out, we would pay a 34% tax of roughly $356,500 and be left with about $692,000.

We have not, we should stress, adopted our strategy favoring long-term investment commitments because of these mathematics.