 |
I was reading a local newspaper (The Times) as I was attending a course in Surrey, UK and there was an article about famed investor Warren Buffet. First off, it does not matter where in the world you are, Buffet is still considered to be the most successful investor ever. Second, the article did a nice job of summarizing some of the advice that Buffet is most recognized for. I could not pass up the opportunity to present those rules here on The Dividend Guy as they are especially relevant in these days of investment.
1. Learn from experience.
2. Be suspicious of the motives of people on Wall Street – “Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.”
3. Don’t be blinded by past performance of a company – “The investor of today does not profit from yesterday’s growth.”
4. Don’t buy into industries whose future performance is difficult to forecast – “I look for businesses in which I think I can predict what they’re going to look like in ten to fifteen years’ time.”
5. Shun any business that is complex and hard to understand – “I want to be able to explain my mistakes. This means I do only the things I completely understand.”
6. Be suspicious of any deal that is widely applauded at the time – “You may pay a very high price in the stock market for a cheery consensus.”
7. Exploit freak conditions that lead even great companies being marked down – “Great opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraisal.”
8. Buy when others are too terrified to – “I buy the stocks when lemmings are headed the other way.”
9. Harness the imperfections and inefficiencies of the stock market which occasionally underprices assets dramatically – “I’d be a bum on the street with a tin cup if the markets were efficient.”
10. When you take a bet, have the courage to do it with meaningful amounts of moneyAnd if you have to borrow, avoid payday loans or similar
high interest financing. – “I can spend money faster than Imelda Marcos when things are right.”
11. Buy businesses at sensible prices – “Our method is very simple. We just try to buy businesses with good-to-superb underlying economics run by honest and able people and buy them at sensible prices. That’s all I’m trying to do.”
There we all have it – investing boiled down to it’s simplest form.
TDG,
Thanks for sharing this list with us. I think that number 8 is very relevant these days:
” Buy when others are too terrified to – “I buy the stocks when lemmings are headed the other way.”
Dividend Growth Investor
No matter who you are or what discipline of investing you adhere to, there is no doubt that Buffett is clearly one of, if not, the best investor. It’s always funny to see the type of people that call him a dinosaur end up becoming extinct.
Whether you are a short-term, intermediate-term, or long-term trader…whether you use fundamental or technical analysis or both you use stock market timing. Unless you buy a stock and hold it until death, you use some form of stock market timing…and even then you may have had to make the decision of the best time to buy the stock.