From the 1962 letter*:
Our target is an approximately 1/2% decline for each 1% decline in (the Dow*) and if achieved, means we have a considerably more conservative (vehicle*) for investment in stocks than practically any alternative.
During the first half of 1962 we had one of the best periods in our history, achieving a minus 7.5% result before payments to partners, compared to the minus 21.7% over-all result on the Dow.
...Six-months' or even one-year's results are not to be taken too seriously. Short periods of measurement exaggerate chance fluctuations in performance.
Whether we do a good job or a poor job is not to be measured by whether we are plus or minus for the year. It is instead to be measured against the general experience in securities as measured by the Dow-Jones Industrial Average, leading investment companies etc.
While I much prefer a five-year test, I feel three years is an absolute minimum for judging performance....If any three-year or longer period produces poor results, we all should start looking around for other places to have our money. An exception to the latter statement would be three years covering a speculative explosion in a bull market.
I am not in the business of predicting general stock market or business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership.
*Written in early 1963 by Buffett to discuss the previous year's performance.