6 Ways To Invest Like Warren Buffett
The investment principles of Warren Buffett have earned him the nickname “the best investor in the world” though on this Buffett laughs about it, when
The investment principles of Warren Buffett have earned him the nickname “the best investor in the world” though on this Buffett laughs about it, when you have an estimated fortune of $ 36 billion, is a fact difficult to contest! However, not everything that is said about him is true. Warren Buffett did not become billionaire investor and he did not “invest” as commonly portrayed by the media! Although it may be a statement “courageous” and optimistic, once you understand its techniques in accumulating wealth, then each of us will be able to make their investments in a more fruitful.
The Truth About Warren Buffett
buffettIniziamo by saying that Buffett is not really an investor: is an owner! An investor is a teacher who makes 100 euros a month of his salary in a mutual fund, an investor is the accountant who put 5% of his monthly salary to purchase one Apple. Is not that what makes Buffett! Warren Buffett buys enough shares to sit on the boards of companies. Even at the beginning, when he was not yet a billionaire, implemented a partnership investing in a company called “Sanborn Map Company”, where he became a member of the board of directors. And when you are a member of the board of any company, you are able to drive the company’s direction, to influence the hiring or replacement of the CEO and the CFO. But this is not what you and I can do! None of us will be able to have as much decision-making power in a society investing 100-200 or even 1000 Euro at a time! This point is important for two reasons. In the first place, you have to admire but also to depart a little from what Buffett ago. He not only finds the undervalued companies, buys and leads to success. He analyzes every detail, the study meticulously and accurately! Second, we must emphasize the fact that if you want wealth, you must be an owner. It ‘true that you can save and invest a little in the long run to have a significant return. However, if you want to earn in the short-medium term, the best way is to own or have a high decision-making power in the choices of a society.
Buffett implementing the “Buy and Hold”?
Buffett is used as an example by the media and by financial advisors as to why you should implement a policy of “buy and hold” (buy and hold). But this is not quite correct! When you purchase and “preserve” a title, buy it, and you keep it in your wallet, no matter what it is. No matter whether you are good or bad economic news, who is the chairman of the board, if there is a recession or an economic boom. You hold that title in both good times and bad. Buffett, on the other hand, buy only for specific reasons and when those reasons are no longer present, it sells! Known as a value investor (who buy shares that have a low price-earnings ratio), Buffett takes a lot into consideration the management of the companies, if their actions they have good prices and their level of competitiveness in the market. For example, in a letter to shareholders in 1996, he said the GM, Sears and IBM as the fantastic companies, but that in his opinion could not long remain competitive in their market: therefore, strongly discouraged to purchase securities of these companies . Of the top 20 companies in which Buffett invests, the only one that still holds is the Berkshire Hathaway! The other 19 ….. does not possess more!
Although probably none of us will have an interest (or the possibility) in own any of the companies in which you invest, you can follow Buffett’s approach to generate more profits and reduce losses. The steps are simple to understand, even though they may be difficult to implement in their investment strategies:
1. Make a list of criteria for the purchase of a security
For example, you can search between the actions of a certain area with a specific price in relation to earnings and analyze its average over the last 6 months. Just remember that the stock price should not be the sole criterion of choice! Often, even a good company suffers a decline in the price of his title due to a market situation or the reference sector: this could present a good buying opportunity, provided that they meet the criteria that you set.
2. Invest in companies that you know
Knowing in principle the companies in which it invests, it is a great way to stay up to date on industry trends and important company news. An investment strategy based on “gossip” or suggestions of pseudo-analysts ….. could lead to failure in the long term. If you are interested in a company that you do not know, but of which you have heard, I suggest you do a lot of research first.
3. Read Newspapers Financial
In addition to the important phase of research, reading financial newspapers will be essential. It is said that Buffett will read as many as five a day!
4. Check Emotions
The good investments you can make only controlling one’s emotions and temperament. In this regard, Buffett said investments in temperament has more intellect!
5. Track the performance of Company
Once you invest, follow the business on a monthly basis and not daily.
6. Sell at the right time
When you feel that there are more reasons to buy shares of a company, sell! If the price falls below the predetermined limit that you had, then it might be a good idea to sell. This is what most of the “followers” of Buffett do. He sets the rules and follow them diligently. When a company no longer meets the criteria, he sells and without any second thoughts!
Still not convinced? At the end of 2004, a title Apple was quoted $ 32 per share. After the entry on the market of the iPhone and the iPod at the end of 2008, the stock Apple initially fell, from 172 to 97 dollars per share. However, good reasons to buy a stock Apple remain unchanged: it was not just a smart move to keep the shares in the portfolio but also buy more! The title Apple today is trading at $ 430 per share (it had a peak of 680!). Yahoo! is the counter-example. The company was born to dominate the world of search engines: Google and then appeared in his dream was shattered! Today Yahoo! has been eclipsed by his rival and has steadily lost market share ….. that is unlikely to recover! So if you have purchased securities Yahoo! ….. it’s time to sell! At least that would make Warren Buffett.
Warren Buffett does not pay attention to the day-to-day stock prices and, mainly, he does not care what the press says about him! He raises two main questions before investing in a company, “It ‘underestimated?” “Generate earnings of all respect?” If the answer to these questions is affirmative, then Buffett buys. If five years later, does not see significant improvements, he sells. Plain and simple. This is the investment strategy of the great Warren Buffett! This is not his specific criteria, but it puts the rules and principles of investing that totally respects, no exceptions. Of course, I’m not saying that by following them you will become billionaires like him, but you’ll definitely fewer losses in certain investment and more profits in others.