7 Secrets of Investing the Warren Buffett way
"Finance & Investment"
While following the crowd is natural, it can lead to big losses when it comes to investing in the stock market. Why copy the mediocrity of the masses when you can copy the success of the World's Greatest Investor?
The investment secrets of warren buffet have got unveiled here.
1) Look at quality businesses; not just the stocks
Warren Buffett said, "When I buy a stock, I don't hedge it with buying a whole company. I buy it as if it were a store down the street."Most investors don't analyze the businesses they invest in. They follow the symbols or brands of successful corporate houses.
Shop for a product and assess the shop. Don’t think that you are only buying a few shares of that company. Will you buy the whole company if you had enough money?
2) Are you willing to own a stock for 10 years? If not, then don’t own it even for 10 minutes.
Only buy something that you'd be happy to hold if the market shut down for 10 years. In the short run, the market counts up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company.
The short-term opportunities in the stock market will not lead to long-term success. If you don't feel comfortable owning something for 10 years, then don't own it even for 10 minutes.
3) Check thousands of stocks and look for very high bargains
Avoid investing based on stock tips or recommendations. Do your own research. Analyze thousands of stocks before choosing the right stock to invest in. Once you have chosen the right stock, wait till the share is available at a very high bargain price. Buying the right stock at the right price is the key to investment success.
Investors have the luxury of waiting for the “fat pitch”. It's hard for an individual investor to do a stock analysis. If you don’t want to do it yourself, you can hire a financial planner or a wealth manager. But, you need to find a professional that is capable and customer-focused.
4) Scrutinize how well management is using the resources.
Check how the management is using its resources like money, manpower, and material. This management efficiency will reflect in ROE and ROIC.
5) Always stay away from “THE HOT STOCKS”
A stock with a lot of attention-grabbing activity is a hot stock. Stay away from these hot stocks. Warren Buffett once said, “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
6) How much money you will make?
Before investing in stock calculate ‘how much money you will make in this investment. Of course, you need to make a few assumptions to do this calculation. But do calculate.
7) Get rid of the weeds and water the flowers — not the other way around
People have this tendency of loss-aversion. That is when the share price has fallen down by 50%, they choose to wait. They convince themselves and others by saying “It will definitely come back”. Also, people will rush to book profit when their shares go up by 10%. In effect, investors keep the losing shares and sell the profitable ones. Actually, it needs to be the other way around.
These seven secrets properly applied in the stock market would be your roadmap to riches.
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