Berkshire Was Too Cheap, Then Too Pricey

There are two ways to buy stock: market orders and limit orders.1 A limit order says: “I would like to buy 100 shares of Amalgamated Widgets at $20 or less.” If the stock is available at $20 or less, you get your shares. If it’s not, you don’t. You don’t know for sure if your order will be executed, but you do know the maximum price. A market order says: “I would like to buy 100 shares of Amalgamated Widgets at whatever price I can get.” You know the order will be executed, but you don’t know at what price.

Market orders are famously risky, because occasionally prices surprise you. So 99.99% of the time, what happens is that you see Amalgamated Widgets stock trading at $20 per share, and you say “I would like some of that,” and you put in an order to buy 100 shares of Amalgamated Widgets at whatever the market price is, and by the time you press the button on your order and it runs through your broker’s systems and gets to the trading venue and gets filled, the price is, like, $20.01, or $20.02, or $19.98 or whatever, and you get your shares at a slightly different price from the one that you saw on the screen, and you say “ah that’s fine” or “oh well, slippage,” and you understand that pressing the buttons on your retail brokerage’s website is not an exact science but it’s good enough.