Money Matters

The Essential Dos and Don'ts in Money Making : This blog strives to provide CRITICAL INSIGHTS and knowledge on wealth creation. Since no effort is free of mistakes, or,can be fool proof, the primary condition, always, is - that Reader must take total responsibility on himself for investments or other use he makes of info on this blog by making sure of the info from other sources too. The blog will remain receptive to any corrections, comments, suggestions etc from readers.

Thursday, February 4, 2010

INVESTOR EDUCATION = INVESTMENT STRATEGIES OF WARREN BUFFET ( POST NO.3)

INVESTOR EDUCATION SERIES

WARREN BUFFET'S

INVESTMENT STRATEGIES

Following are a few more ideas of Warren Buffet on Investment Strategies :

Think independently. Warren Buffet lays great stress on INDEPENDENT THINKING, ANALYSIS AND DECISION. Our decisions must not be based on what others think.
His mentor Ben Graham, whom he adores, says, " you are neither right nor wrong because people agree with you.You're right because your facts and your REASONING are right."
Warren Buffet, is almost allergic to following the crowd. But, at the same time, he does not go mindlessly against the CROWD BEHAVIOUR. There is never ever popular wisdom in stock market. it is always INDEPENDENT WISDOM.
Get your facts, analyze and act. This is the Simple Investment strategy to follow.
Develop a level of competence in certain Industries and stay within your CIRCLE OF COMPETENCE. Do not stray away, outside the circle of your competence. But, by all means, study the industries and businesses within your circle of competence thoroughly.
You may be ruling out 90 percent of businesses in the process. But, you will be making excellent investments in the businesses in the circle of your competence.
Ignore stock MARKET FORECASTS - especially of the short term variety. Instead, concentrate on analyzing the businesses you are in, or want to be in. Most forecasts show a lot of data seemingly supporting them.But, most of them are unaware of the forces acting beyond that data.
Develop an investment strategy that does not depend on the overall movement of the market.
There can be no precision forecasts in a volatile market. Be skeptical about all such forecasts.
Ben Graham taught warren 3 concepts which he follows well. (i) Mr.Market (ii) Margin of Safety, and (iii) stock is a part ownership of a business.
Mr.Market is almost manic-depressive always. He feels euphoric on one day when the prices have risen. He feels depressed on the day when prices have fallen. He comes up with stock quotes every day and with its associated mood. Read the mood of the Mr.Market by all means.Act in ways that take into account this mood. But,do not get swept away in the mood yourself. Never fall under the influence of Mr. Market. Exploit Mr. Market, but do not get into his moods.
Margin of Safety implies - that your stock BUYs are at a price substantially lower than the value of the Business. Warren Buffet talks of buying a Dollar Bill at 40 cents in the stock market. In ensuring this margin of safety, Mr.Market must be your servant rather than your guide.
Margin of safety depends on Intrinsic value, which again depends on factors like variability of interest rates etc and is a subjective estimate to some extent.
Wait for Mr. Market to get depressed sufficiently, so that your Margin of safety arrives. Then, seize your BUYING OPPORTUNITY.
Be fearful when others are greedy and Greedy when others are fearful, says Warren Buffet. People do become greedy, fearful or foolish - and are unpredictable. Do not make investments when stock prices are rising irrationally. The irrational mood swings affect market professionals as much as it affects other investors.
Buy when people are selling - at lowering prices. SELL when people are buying - at rising prices. This is your opportunity.

Good Luck, Readers!

Other Articles in CUSTOMER EDUCATION SERIES can be read at the following URLs :

1. 1. MONEY FASCINATES:

http://wiseinvestmentideas.blogspot.com/2010/01/money-fascinates.html

2. MARKET INVESTMENT : ESSENTIAL RULES FOR SUCCESS:

http://wiseinvestmentideas.blogspot.com/2010/01/stock-market-investment-essentail-rules.html

3. SELECTING A GOOD SCRIP FOR INVESTMENT

http://wiseinvestmentideas.blogspot.com/2010/01/selecting-good-scrip-for-investment.html

4. INVESTMENT STRATEGIES OF WARREN BUFFET: (5 ARTICLES)

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_05.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_04.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffer.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet.html

6. WORDS OF WISDOM FROM WARREN BUFFET:

http://wiseinvestmentideas.blogspot.com/2010/05/warren-buffet-wisest-stock-market-guru.html

7. DOLLAR (RUPEE) COST AVERAGING :

http://wiseinvestmentideas.blogspot.com/2010/05/win-with-dollar-rupee-cost-averaging.html

8. PRICE TO EARNINGS RATIO :

http://wiseinvestmentideas.blogspot.com/2010/05/price-earnings-ratio-investor-education.html

9. GROWTH STOCKS vs VALUE STOCKS :

http://wiseinvestmentideas.blogspot.com/2010/06/growth-stocks-value-stocks-two-great.html

10. CANSLIM TECHNIQUE :

http://wiseinvestmentideas.blogspot.com/2010/06/investor-education-canslim-technique.html

11. PRICE TO BOOK VALUE RATIO

http://wiseinvestmentideas.blogspot.com/2010/11/investor-education-series-price-to-book.html

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INVESTOR EDUCATION = INVESTMENT STRATEGIES OF WARREN BUFFET (POST.NO.2)

INVESTOR EDUCATION SERIES

WARREN BUFFET'S

INVESTMENT STRATEGIES

We will continue with the ideas of Warren Buffet on Investment strategies :

Some times, the market goes through huge downturns. Characteristically, the majority starts deserting even good stocks and these become available at low prices. What do you do? Warren says - market downturns are not body blows to you. They are BUYING OPPORTUNITIES.
When herd starts running away from good stocks, get ready to run towards them. Market gets into this sort of PANIC situations periodically. That is the time you profit from it. Learn to like a bear market. Search for value in it.Warren says - INVESTORS DON'T LOSE WHEN MARKETS FALL - ONLY "DISINVESTORS."
To be a successful investor, you don't have to make a large number of Investment Decisions. One good decision for one year is a high standard, feels Warren. This is enough to guarantee success. You don't have to predict every stock's future. But, what you predict, let it be thorough. Them you won't make risky investments. This itself guarantees success.
Warren frankly admits his omissions and commissions, from which he learns lessons very clearly. He says, BE DISCIPLINED to wait patiently for a good company, with a good business under a good management, which is selling at a discounted price. Go for it. It calls for patience. You only need a few good investments for great success.
Concentrate on the MICROs, the business specific matters that count. Do not worry too much about MACROs, unless they are usiness specific. Our economic indicators, deficits, monetary policies and so on - do not bother much about them. You must be a business analyst - not a great national analyst, not a great economist. But, such macro events do create opportunities for you. Look for those business opportunities.
Always go for GOOD MANAGEMENTS. Find, who is in charge. Do not go for untrustworthy managements. Do the managements really care for all shareholders? Are their annual reports transparent and frank? Study these aspects very carefully. You can't make a good deal with a bad person, though you can make a bad deal with a good person.
This means, avoid poor businesses, even those having great managements.There are, of course, no great businesses with bad managements.Avoid companies who are frequently committing malpractices.
Stock market, feels Warren Buffet, is the only place where people go to in Rolls Royces to get advice from people who take the subway. Too many ideas are always floating from so many experts,every day, minute by minute about buying opportunities and selling opportunities.If these are so wonderful opportunities, why are so few people profiting from them?
Instead of charts, technical analysis etc, Warren Buffet prefers to FOCUS ON THE VALUE of the business.All mutual funds say in small, fine print that our past performance is no guarantee of future success. If history revealed the path to riches, librarians would be rich.
Good Luck to all readers!

Other Articles in CUSTOMER EDUCATION SERIES can be read at the following URLs :

1. 1. MONEY FASCINATES:

http://wiseinvestmentideas.blogspot.com/2010/01/money-fascinates.html

2. MARKET INVESTMENT : ESSENTIAL RULES FOR SUCCESS:

http://wiseinvestmentideas.blogspot.com/2010/01/stock-market-investment-essentail-rules.html

3. SELECTING A GOOD SCRIP FOR INVESTMENT

http://wiseinvestmentideas.blogspot.com/2010/01/selecting-good-scrip-for-investment.html

4. INVESTMENT STRATEGIES OF WARREN BUFFET: (5 ARTICLES)

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_05.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet_04.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffer.html

http://wiseinvestmentideas.blogspot.com/2010/02/investment-strategies-of-warren-buffet.html

6. WORDS OF WISDOM FROM WARREN BUFFET:

http://wiseinvestmentideas.blogspot.com/2010/05/warren-buffet-wisest-stock-market-guru.html

7. DOLLAR (RUPEE) COST AVERAGING :

http://wiseinvestmentideas.blogspot.com/2010/05/win-with-dollar-rupee-cost-averaging.html

8. PRICE TO EARNINGS RATIO :

http://wiseinvestmentideas.blogspot.com/2010/05/price-earnings-ratio-investor-education.html

9. GROWTH STOCKS vs VALUE STOCKS :

http://wiseinvestmentideas.blogspot.com/2010/06/growth-stocks-value-stocks-two-great.html

10. CANSLIM TECHNIQUE :

http://wiseinvestmentideas.blogspot.com/2010/06/investor-education-canslim-technique.html

11. PRICE TO BOOK VALUE RATIO

http://wiseinvestmentideas.blogspot.com/2010/11/investor-education-series-price-to-book.html

* * * E N D * * *

Wednesday, February 3, 2010

INVESTOR EDUCATION = INVESTMENT STRATEGIES OF WARREN BUFFET

INVESTOR EDUCATION SERIES

WARREN BUFFET'S

INVESTMENT STRATEGIES

Warren Buffet followed Investment principles that are simple, easy to understand and easy to follow: I will be reverting back to Warren Buffet again and again in this Blog, as warren is admittedly the most successful investor of our time.Here are some of his ideas.

Choose simplicity over complexity; Do not try complex mathematical models for your investment decisions. The soundness of your Investment Decision must be self evident.Look for long lasting companies with predictable Business models. If you don't understand the business of a company, do not buy its shares. This means that, one must buy stock of companies under strong, solid, ethical Managements.
Make your own Investment Decisions.You are capable of investing successfully without listening to brokers, stock market pundits and other Professionals. A broker's Incomes depends on how many times you SELL and BUY, and not how wisely you do it. Your frequent ACTIVITY and not its final RESULT is the breadwinner for Brokers and professionals. Understand this clearly. Make your own search for companies whose intrinsic worth is much more than their share price. Sooner or later, the Share price will rise up to meet the intrinsic worth. This is called Value Investing. Never ever make an investment decision merely because somebody told you to do.
For Value Investing, you need some basic knowledge of Accounting and Finance and market functioning. Based on them, you must assemble your own detailed logic for buying a firm's shares, preferably in writing.
Practice a sound temperament to succeed.You can't afford to become euphoric when stock prices are galloping upwards. You can't become depressed when they are moving southwards. You must face negative events especially, very calmly. Do not invest in shares if it would cause you to panic if the price falls by 50 percent.
Buy great businesses and hold on to them for years.Do not just hop in and hop out of stocks. More often, sticking with a great company for a longer time pays you much more than hopping in and out of glaring, current hot stocks.
This requires Patience. Think of a 10 year Investment rather than a 10 minute or 10 days investment. If you are not prepared to hold the stock for a decade, don't buy it in the first place.Patience is part of the Game. How long will you wait. For Buffet, the answer is -"if we are in the right place, we'll wait indefinitely."
Buffet prefers clearly understandable businesses, with favourable long term prospects. They must be operated by honest and competent people. They must be available at an attractive price. Search for certainty in uncertain markets - for businesses which will outperform others over the long run.Evaluate their fundamentals like profits, cash flows and other efficiency parameters that determine its long term health. Use all authentic reports available for the purpose. Internet is a great hep for the purpose.
Search out for Businesses which are either monopolies, or sectors in which it is difficult for others to enter.Existing companies are like protected fortresses in those sectors and are likely to do well.
Today's High Tech becomes tomorrow's Low Tech. Competition enters soon and reduces profit margins. In the long run, it is the solid, low-tech, everyone-needs type of products and services which will rule. Look for such products and services and companies that make them.If technology change is TOO FREQUENT in a sector, it is difficult to say which company will stay at the TOP after 10 years.
Should you DIVERSIFY or should you CONCENTRATE your investments? Choose no more than 10 good companies to invest. Warren does not prefer too much diversification. When you have chosen the best businesses, in good sectors, better concentrate your investments in them rather than dilute them into less profitable companies.
Warren believes that there are times when doing nothing is a sign of INVESTING BRILLIANCE. Frequent trading shows unnecessary over-activity and is likely to result in much less profits than sticking to your well planned investments and doing nothing thereafter. Do not mistake activity for achievement. There are too many hidden costs in hyperactive trading.
If you are a value investor, do not be overly interested in minute-to-minute, or even day-to-day stock prices, of even those stocks which are in your Portfolio. Even monthly movements are of less importance. These ups and downs of stock price are much less important for a value investor. What is of real interest is - how the Business is performing. Keep your eyes on the BUSINESS PERFORMANCE and not on STOCK PRICE PERFORMANCE.
KEEP ALL EYES ON VALUE AND NOT ON PRICE.