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10 Investment Advises I Learned by Hearing to Warren Buffet

There is probably no one who is quoted (and misquoted) more than Warren Buffet on investing. Unfortunately lot of it is not correct. So, I decided to listen to several of Warren Buffet’s interviews and here are key nuggets of Warrant Buffet’s wisdom.

  1. Efficient Market theory does not hold true. Stocks can be undervalued and overvalued at any given point of time. If you can value a stock, you can make money in stock market.
  2. Do not try to time the market. It is not possible to identify the right time to buy a stock. You just need to find the right stock at right price.
  3. Think of stock as piece of business you are going to own. If you have excellent business that will be a winner in the industry and is not hyped, you can make money. Think as if you are going to own the business forever (say 100 years).
  4. Volatility is not bad. Traditionally, volatility is seen as measure of risk. But for Warren Buffet, Volatility is good as it provides opportunity to buy a stock at lower price.
  5. You need to cut through the noise to find right stock. If you buy stock after listening to experts on TV, other media, or your neighbour, then you are not going to find a good value stock. You should gather facts, and do your own analysis.
  6. You don’t need very high IQ to succeed as investors (Just about 130 is enough). What you need is very high level of discipline and temperament.
  7. Stick to your area of competence. Don’t invest in business you do not understand. Warren Buffet uses Tech industry as an example of industry which he feels is outside of area of competency. For other people, it can be any other industry (such as alternative energy).
  8. Find company with good economic moat. Economic moat is anything that gives a company long term advantage over competitors. It could be brand, scale, entry barrier, Patents or other form of IP etc or any other competitive advantage. If the economic moat is widening, it is even better.
  9. If you are doubtful about value of stock, don’t invest. There are thousands of stocks to choose from. And even if you cannot find anything, stay in cash. It is better to wait for right opportunity.
  10. If you are an average investor or do not have time to research and analyze stock, you would be better off buying an index fund. Economy does well over time, so you will any make good money and become wealthy over time.

Comments

  1. Time Management, Smart thinking, Risk Taker and Great leader.

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