WARREN BUFFET’S
GREATEST QUOTES
& EXPLANATIONS
FOR YOUR SURE-SHOT SUCCESS
AS STOCK INVESTORS
(1ST SERIES)
1. I always
knew I was going to be rich. I don't think I ever doubted it for a minute.
This reflects Warren Buffet’s self confidence, his
passion for investing and his total confidence in his methods of Investing. You
may be circumspect in your moves. But, be self confident that you are going to
succeed. That is what Warrant Buffet wants in each of us
2. Risk
comes from not knowing what you're doing
Warren Buffet says – never invest in a Business you
don’t understand. Understand the Business well, before you invest in it. If you
don’t understand the Business and its prospects well, you are risking your capital.
Real Risk is lack of knowledge and lack of
understanding of - where you are putting your money and effort; nothing
else. The price of this risk of
ignorance is – potential loss of capital.
3. Rule
No.1: Never lose money. Rule No.2: Never forget rule No.1.
There is only a
single rule for success in investing. You must guard your capital well. If you
don’t allow your capital to go down below its purchase price or par value, then,
the only way is Upwards. You must find all possible ways to ensure this.
4. Do not
save what is left after spending; instead spend what is left after saving
Saving actually means – investing. Keeping idle cash is
not Saving. You must invest. Depending on your Income, decide the saving and
spending proportions by discussion in your household, with your spouse,
parents, children etc. Once You have decided this, stick to this proportion.
Every month, save and invest first. Spend the rest. You will never regret this well
thought of saving-spending style at all.
5. Price is
what you pay. Value is what you get.
In a perfectly competitive market, price will
correspond to the intrinsic value of shares. But, stock market is never
perfect. There is some sort of logical, emotional assessment (or both or in
some cases, neither), of the intrinsic value of a share among millions of
Investors and then its market price tries to follow that intrinsic value.
But, Price also depends heavily on demand and supply
factors apart from value. Therefore, there is always, some difference between
price and value of a stock. Investors must look for this difference.
Examine well and find out Shares in which value is
significantly more than the market price. Buy that share. You pay LOWER price.
You get HIGHER value. That’s the intelligent bargain. Every investor must try
to achieve this additional value in every purchase he makes.
6. In the
business world, the rear-view mirror is always clearer than the windshield.
Past performance is always available to investors for
analysis and assessment but not the expected future performance. We can dissect last 5 years P&L Accounts,
Balance sheets and Cash Flow statements.
If the Past performance was very Good, it does not
automatically follow that future performance also will be very good.
If past performance was unsatisfactory, future performance
also need not follow the same pattern.
Estimating future performance is no doubt, most
important but, past is only a very rough guide and not a completely reliable
guide. Many other factors need consideration for it.
7. The
investor of today does not profit from yesterday's growth.
You
are investing today. Your profits (or losses) will accrue from the time of your
Buying. The share might have yielded Multi bagger profits till yesterday. But,
those profits are not yours. They don’t matter at all for you.
The
company might have grown at a fantastic rate till last year. But, that growth
does not matter for you. What matters for you is future growth rate, future
sales, future profitability.
Think
about the future performance, not about the Past glory.
8. If past
history was all there to the game, the richest people would be librarians.
All history, all statistics, all logic of the past is
available in many books and the books are all in Libraries. Librarians know
where the Book is and what its contents are. Those who refer these books in
Libraries also know all this.
But, the most successful Investors are referring
something else. Not just the books with the Librarians. They are assessing the
future performance. They are marching into that magical future, with the
guidance of robust common sense.
9. Beware of
geeks bearing formulas
There
are many academicians, experts who study the market from outside,
statisticians, logicians and others who apply numerous complicated formulas and
theories to market behavior and stock behavior and they come up with widely
varying explanations to market and stock behavior.
The
genuine long term investor must be wary of these formulas and explanation
trotting Geeks. You, as investor, are in
the war front with soiled hands. You are the real investor in a particular
scrip. You must make your fundamental and technical analysis with robust common
sense. That is what Warren Buffet did and most other successful investors did.
10.
There seems to be some perverse human characteristic
that likes to make easy things difficult.
Stock investing is not a very complicated technical
subject. You must apply robust common sense to it.
Minimum formulae, Minimum technical analysis but robust
analysis of the Management, the product demand and supply, scope for
scalability and such other common sense aspects.
These are comparatively easier than drawing graphs and analyzing
them. Don’t make easy things difficult.
11.
The big question about how people behave is
whether they've got an Inner Scorecard or an Outer Scorecard. It helps if you
can be satisfied with an Inner Scorecard.
The outer scorecard consists of - market tips, rumours,
expert opinion and so on. Market abounds in them. The inner score card is the
Investor’s own personal analysis of the company, the product, its demand and
supply, company’s scalability and along with these factors, investor’s own
estimate of the company’s future performance.
Do you have an Inner score card? Are you satisfied with
your Inner score card? There are the vital questions to be answered by you, as
an investor.
12.
We enjoy the process far more than the proceeds.
You know… you keep doing the same things and you keep getting the same result
over and over again
Buying is a process. Holding is a process. Selling is a
process. You must know why you are Buying, Holding and Selling any particular
scrip.
You must be able to explain the process you followed
and your logic, for each of these at any time. The process is more important
and you must enjoy your process.
Now, last time you did the Buying, you followed some
process, some logic. This time, how much better can you make it, based on last
time experience? Are you becoming better with each experience?
Are you learning? Are you applying your learning to
every subsequent process? The final result will no doubt, reflect your
learning. But, what matters is – whether you are learning and whether you are
applying that learning to every subsequent transaction.
13.
You only have to do a very few things right
in your life so long as you don't do too many things wrong.
The Art of stock investing is not an EXACT SCIENCE. It
doesn’t work the same way, each and every time. The results will vary each time,
at least to some extent, because, all circumstances have changed to some extent
at least. But then, based on your experience, you can always modify your
responses.
Your success is always a percentage of the total number
of attempts or transactions. If you make 10 BUYs, 6 or 7 out of them will go
according to your anticipation or better than that or slightly lower but still
OK.
But, 3 or 4 will fail beyond your anticipation. It
happens always.
This doesn’t matter at all. If you do the majority of
things reasonably right but fail in a few things, that itself is a great
success for you. Where you succeeded, it is usually much beyond your estimation.
Where you failed, it is just a tad lower than your estimation and not very
significant. Even if 1 or 2 are bad failures, your overall tally of success is
still very significant and great. You are a Great success. All eminent,
successful Investors of the world were made like that only. I wish you all
success.
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