Tuesday, May 25, 2010



Warren Buffet continues to dazzle and puzzle investors with his vast experience.

(1) "We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children." says, Warren Buffett.
I have, myself felt this for a long time, but, was afraid of saying this in the face of so many stock analysts making so many short term predictions daily.I was wondering, how many more days should I see them prove themselves so totally wrong? On an odd day, when a single, odd prediction comes true by chance, they are so jumpy like Children! I thought I was the only one who felt that way. So,now I know that Warren is on my side too.. a comforting feeling.

(2) "For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up." - Warren Buffett

How True! Unless we are convinced of intrinsic value of a stock, we must never go for it - simply because some one else is buying and price is going up.

(3) "When you combine ignorance and leverage, you get some pretty interesting results." - Warren Buffett 

I have no statistics, for sure - but, greed for stock + leverage + ignorance may be going together in many cases - especially in the presence of unbridled ambition to get rich quick. Ambition + ignorance are themselves lethal, but combine it with leverage - your certainly get some pretty interesting results.

(4) "The best protection against inflation is your own earning power. If you are the best teacher, you will command earning power and get your share of the national economic pie, regardless of the value of the currency. The second best investment is in a good company." - Warren Buffett 

If one consistently develops sufficient earning power and ability - inflation is not a big issue for him. Or else, you must find a  great company - which gives superior returns to beat any INFLATION and entrust your money to it. 

No use, worrying individually about inflation. It will happen. Beat the inflation, Warren's way.

(5) "One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as 'marketability' and 'liquidity," sing the praises of companies with high share turnover... but investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pick pocket of enterprise." - Warren Buffett 

Yes. Hyperactivity creates bloating sense of all values. It may fall any time.Activity - especially stock market activity -  is not intrinsic value creation.

(6) "Diversification may preserve wealth, but concentration builds wealth." - Warren Buffet

Diversification surely does insure us against misjudgments on any single stock. It preserves wealth. You lose some on one stock, but gain on another, so you are there at the same place. But, with adequate research and knowledge of a Growth stock, you can concentrate investing on a single, efficient stock. After all, Bill gates invested in a single stock -  of his company -  Microsoft. So did most successful investors. The catch is - first find and then, concentrate on a GOOD, GROWTH STOCK.

(7) "If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes" - Warren Buffett

One of the best ever mantras is this. Be sure of the stock you are investing in. Else, don't invest at all. Make adequate research. Find the Management quality, Product quality, service quality, how you would buy the company's product / service. If you feel satisfied, i.e., feel satisfied that the stock will be a great, growth stock even after 10 years, then, BUY the stock. There are such good, growth stocks.Be sure of that.   

(8) "Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases." - Warren Buffett 

I agree. But, People are greedy and go on shuffling Portfolios constantly.  A few successful investors like warren, stick with a well chosen Portfolio for years, even decades.

Since you always adopt either this or that option and not both - there is possibly no way of proving or disproving this Law to your self - which of the 2 options is better.

The truth of this Law depends primarily on one condition. You must research well and locate a good growth stock first. Then stick with it, forever.

Much like a marriage. If you ab-initio, locate your  near-perfect match and stay put, your marriage is a grand success. Else, you can go on shuffling your spouses life long, to locate the perfect one, till the last.

By the way - there is neither a perfect spouse not a perfect growth stock. A good one is good enough.It eventually becomes a great one.


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