I Cannot Believe you have not copied my Investing Strategy

..so said Warren Buffett, during his recent talk (14 Sept 2012) with MBA student at Richard Ivey School of Business (based on notes from market folly).

He further adds…

I don’t know! It’s not about high IQ. I am also puzzled by why value investing hasn’t caught on. I mean, what other type of investing is there? You want something other than value? But the things is, people just don’t want to believe. They elect things that are emotionally satisfying.Even if you show them the results, they still don’t believe you. However, eventually proof comes through results.

However, a group of minority will subscribe to Buffett’s idea. An ardent reader of HowToFinanceMoney.com, Zhafri is definitely one of them. He has done a good job distilling Warren Buffett’s investing philosophies into small bite-able chunks. You probably heard of all these before, but it’s never redundant to rehash them and remind ourselves how we should be  investing our money in the stock market. Here’s his write-up

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When it comes to the world of investments – especially in the stock market – Warren Buffet, the Chief Executive Officer of Berkshire Hathaway, is an enigma.

Celebrated as the “Oracle of Omaha” because of his unparalleled success in the stock market, Warren Buffet lives the life of your regular next-door neighbour, hardly eats in classy restaurants and drives a regular, used 4-wheel drive.

How is he able to maintain success for so many years? Here are some of his best advice. Hear him:

Stay liquid

“We will never become dependent on the kindness of strangers. We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses.”

Buy when everyone else is selling

“We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend…. Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

Don’t buy when everyone else is buying

“Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying.”

Value, value, value

“In the end, what counts in investing is what you pay for a business — through the purchase of a small piece of it in the stock market — and what that business earns in the succeeding decade or two.”

Don’t get suckered by big growth stories

Buffett further reminded investors that he and Berkshire’s Vice Chairman, Charlie Munger, “avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be.”
Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. “Dramatic growth” doesn’t always lead to high profit margins and returns on capital.

Understand what you own

“Investors, who buy and sell based upon media or analyst commentary are not for us.
“We want partners, who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it’s one that follows policies with which they concur.”

Defence beats offense

“Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the 11 years during which it delivered negative results. In other words, our defense has been better than our offense, and that’s likely to continue.”

Hard work

All hard work bring a profit, but mere talk leads only to poverty.

Laziness

A sleeping lobster is carried away by the water current.

Earnings

Never depend on a single source of income. (At least make your Investments get you second earning)

Spending

If you buy things you don’t need, you’ll soon sell things you need.

Savings

Don’t save what is left after spending; Spend what is left after saving.

Borrowings

The borrower becomes the lender’s slave.

Accounting

It’s no use carrying an umbrella, if your shoes are leaking.

Auditing

Beware of little expenses; A small leak can sink a large ship.

Risk-taking

Never test the depth of the river with both feet.(Have an alternate plan ready)

Investment

Don’t put all your eggs in one basket.

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And finally, here’s another kicker from Buffett:

Value investors are not concerned with getting rich tomorrow. People who want to get rich quickly, will not get rich at all. There is nothing wrong with getting rich slowly. Remember we both sleep on the same mattress and eat the same food.

Source: Business Insider

This Post Has 8 Comments

  1. Hi Peter, I’m sorry if I make you feel unpleasant with those article. Regarding the quot “don’t put all eggs in 1 basket” it brings a very long history with it.

    I first heard of this quot in somewhere around 2006, word of mouth, and one of the journal published stating this quot dated 27 September 1999, means its been a popular quot since long way back.

    I know its hard to prove who started this quot, but this is the link to the journal I was talking about

    I’m sorry man, I also receive this article from a reputable local investment bank. And I don’t think its wrong for buffet or anyone to recite this quot again and again.

  2. Then why do you put it in your blog without correcting it? It’s like perpetuating the mistake over and over again.

    Thanks.

    1. Hey Peter, I am respecting the user contributed article by keeping it intact as it is. Of course, I am no expert in knowing everything what Buffett had said before when I posted this up, unlike yourself or Zhafri. Therefore I am more than happy to post anyone’s comment (like yours), acknowledging the correction. Cheers!

  3. LCF,

    You mean I’m right that Buffett didn’t say the quotes?

    1. Yea, absolutely, Peter, coming from you. Congrats for the new addition to your family, btw.

  4. Hey Peter, yes, you are right 🙂

  5. While the initial quote was from Buffett, but i doubt he said the quote starting from
    Hardwork till Investment.

    And i’m very sure he don’t say don’t put all eggs in 1 basket. No, I guarantee it.

    Lastly, Koon Yew Yin should read (and hopefully able to digest and understands it).

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