Saturday, April 7, 2018

WARREN BUFFET’S MOST POPULAR QUOTES & EXPLANATIONS FOR YOUR SURE-SHOT SUCCESS - 1ST SERIES


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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