The Nine Investing Secrets by Warren Buffett
Oh well, yeah..Another book.... a decent one at that too...And not very voluminous, shouldn't take more than 3 decent sittings to skim it through- over and out..;-)
Investing ain't that easy- learning the tricks of the trade of a pastmaster does not hedge you from the risks that comes with investment...We learnt about investing in a portfolio that is reasonably diverse to diversify and hence, minimise the risk...
Just to have a hang of this amazing investor, spare a thought on this snippet:
In 47 years, Buffett’s investment company, Berkshire Hathaway has achieved returns of 259,485% versus the S&P 500 returns of 4,783%. The difference in results is an astonishing 254,747%!
Look at what the Pundit has to say:
“I have seen no trend toward value investing in the 35 years I’ve practised it,” Buffett declared some years back in the Chicago Tribune. “There seems to be some perverse human characteristic that likes to make easy things difficult.”
Anyways, for all of you who wants everything in a shortcut way- i would enlist the main (nine) points and leave it to you for your interpretations..I have touched upon all the points with possibly the best statements that summarizes the whole point (purely subjective though).Nothing revolutionary,dramatic or sensational stuff, but definitely a highly commonsensical approach-something that easily appeals to your logic...So,here goes:
Secret #1: Invest in quality businesses, not stock symbols:
“When I buy a stock,” Warren Buffett said, “I think of it in terms of buying a whole company, just as if I were buying a store down the street.”
Secret #2: Don’t invest for ten minutes if you’re not prepared to invest for ten years:
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.Put together a portfolio of companies whose aggregate earnings march upwards over the years, and so will the portfolio’s market value.”
Secret #3: Scan thousands of stocks looking for screaming bargains:
“If (the investment) doesn’t scream at you,” he once said, “it’s too close.”
Secret #4: Calculate how well management is using the money they have:
Every year, Warren Buffett writes in the annual report of Berkshire Hathaway that he is eager to hear about businesses that, amongst other things, are earning “good returns on equity while employing little or no debt.” This means that ROE and ROC are essentially the same.
Secret #5: Stay away from “glitter” stocks:
“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
Secret #6: Know what a fat pitch is and what to do with it:
Wait until everything is in your favour. Nothing makes you buy any particular stock at any particular time. As investors we have the luxury of waiting for the “fat pitch.”
Secret #7: Calculate how much money you will make, not whether the stock is undervalued or overvalued according to some academic model:
There are various academic models for calculating what is called the intrinsic value of a stock. All these models, referred to as discount cash flow models, are fatally flawed. There are four areas that bring them down. They are theoretical, contradictory, unstable and untestable.
Secret #8: Remove the weeds and water the flowers — not the other way around:
People would have been better to sell their losers and keep their winners. Instead, they did the opposite, namely keep their losers and sell their winners.
Secret #9: Become a conscious investor:
"Risk comes from NOT knowing what we are doing"
So there they are...The "magic" rules, so to say.. ;-)
Investing ain't that easy- learning the tricks of the trade of a pastmaster does not hedge you from the risks that comes with investment...We learnt about investing in a portfolio that is reasonably diverse to diversify and hence, minimise the risk...
Just to have a hang of this amazing investor, spare a thought on this snippet:
In 47 years, Buffett’s investment company, Berkshire Hathaway has achieved returns of 259,485% versus the S&P 500 returns of 4,783%. The difference in results is an astonishing 254,747%!
Look at what the Pundit has to say:
“I have seen no trend toward value investing in the 35 years I’ve practised it,” Buffett declared some years back in the Chicago Tribune. “There seems to be some perverse human characteristic that likes to make easy things difficult.”
Anyways, for all of you who wants everything in a shortcut way- i would enlist the main (nine) points and leave it to you for your interpretations..I have touched upon all the points with possibly the best statements that summarizes the whole point (purely subjective though).Nothing revolutionary,dramatic or sensational stuff, but definitely a highly commonsensical approach-something that easily appeals to your logic...So,here goes:
Secret #1: Invest in quality businesses, not stock symbols:
“When I buy a stock,” Warren Buffett said, “I think of it in terms of buying a whole company, just as if I were buying a store down the street.”
Secret #2: Don’t invest for ten minutes if you’re not prepared to invest for ten years:
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.Put together a portfolio of companies whose aggregate earnings march upwards over the years, and so will the portfolio’s market value.”
Secret #3: Scan thousands of stocks looking for screaming bargains:
“If (the investment) doesn’t scream at you,” he once said, “it’s too close.”
Secret #4: Calculate how well management is using the money they have:
Every year, Warren Buffett writes in the annual report of Berkshire Hathaway that he is eager to hear about businesses that, amongst other things, are earning “good returns on equity while employing little or no debt.” This means that ROE and ROC are essentially the same.
Secret #5: Stay away from “glitter” stocks:
“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
Secret #6: Know what a fat pitch is and what to do with it:
Wait until everything is in your favour. Nothing makes you buy any particular stock at any particular time. As investors we have the luxury of waiting for the “fat pitch.”
Secret #7: Calculate how much money you will make, not whether the stock is undervalued or overvalued according to some academic model:
There are various academic models for calculating what is called the intrinsic value of a stock. All these models, referred to as discount cash flow models, are fatally flawed. There are four areas that bring them down. They are theoretical, contradictory, unstable and untestable.
Secret #8: Remove the weeds and water the flowers — not the other way around:
People would have been better to sell their losers and keep their winners. Instead, they did the opposite, namely keep their losers and sell their winners.
Secret #9: Become a conscious investor:
"Risk comes from NOT knowing what we are doing"
So there they are...The "magic" rules, so to say.. ;-)
posted by ruddi at 3:06 AM
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