How Buffet Does It?

24 Simple Investing Strategies From The World's Greatest Value Investor!

1. Choose Simplicity over Complexity
   
When investing, keep it simple. Do what's easy and obvious, advises Buffet; don't try to develop complicated answers to complicated questions.


2. Make your Own Investment Decisions
Don't listen to the brokers, the analysts, or the pundits. Figure it out for yourself.


3. Maintain Proper Temperament
>Let's other people overreact to the market, Buffet advises. Keep your head when others do not, and you will benefit.


4. Be Patient
Think 10 years, rather than 10 minutes, advises Buffet. If you aren't prepared to hold a given stock for a decade, don't buy it in the first place.


5. Buy Businesses, Not Stocks
Once you get into the right business, you can let everyone else worry about the stock market.


6. Look for a Company That is a Franchise
Some businesses are what Warren Buffet calls "franchises". They have high walls and deep moats around them. They are More or less unassailable. These are the businesses you want to find.


7. Buy Low-Tech, Not High-Tech
In Buffet's world, successful investing is rarely a gee-whiz activity. It's less often about rockets and lasers and more often about things such as brick, carpets, paint and insulation.


8. Concentrate Your Stock Investments
Avoid what Buffet calls the "Noah's Ark" style of investing - that is, a little of this, a little of that. Better to have a smaller number of investments with more of your money in each.


9. Practice inactivity, not Hyperactivity
There are times when doing nothing is a sign of investing brilliance.


10. Don't Look at the Ticker
Tickers are all about prices. Investing is about a lot more than prices.


11. View Market Downturns as Buying Opportunities
Market downturns aren't body blows; they are buying opportunities. If the herd start running away from a good stock, get ready to run toward it.


12. Don't Swing at Every Pitch
What if you had to predict how every stock in the Standard & Poor's (S&P) 500 would do over the next few years? In this scenario, Warren Buffet - one of the greatest investors of all time - doesn't like his chances. But what if your job was to find only one stock among those 500 that would do well? In this revised scenario, Buffer now likes his odds, which he figures at something like 9 in 10.


13. Ignore the Macro; Focus on the Micro
According to Warren Buffet, the big things - the large trends that are external to the business - don't matter. It's the little things, the things that are business-specific, that count.


14. Take a Close Look at Management
The analysis begins - and sometimes ends - with one key question: Who's in charge here?


15. Remember, The Emperor Wears No Clothes on Wall Street
Wall Street, says Warren Buffet, is the only place where people got to in Roll Royces to get advice from people who take the subway.


16. Practice Independent Thinking
When investing, you need to think independently.


17. Stay within Your Circle of Competence
Develop a zone of expertise, operate within that zone, and don't beat yourself up for missing opportunities that arise outside that zone.


18. Ignore Stock Market Forecasts
Short-term forecast of stock or bond prices are useless, says Warren Buffet. They tell you more about the forecaster that they tell you about the future.


19. Understand "Mr. Market" and the "Margin of Safety"
What makes for a good investor? According to Warren Buffet, a good investor is someone who combines good business judgment with an ability to ignore the wild swings of the marketplace. When the emotions start to swirl, says Buffet, remember Ben Graham's "Mr. Market" concept, and look for a "Margin of Safety".


20. Be Fearful When Others Are Greedy and Greedy When Others Are Fearful
You can safely predict that people will be greedy, fearful, or foolish, says Buffet. yous just can't predict when or in what order.


21. Read, Read Some More, and Then Think
How does Warren Buffet - the world's greatest investor spend his time? By his own reckoning, he spends something like six hours a day reading and an hour or two on the phone. The rest of the time, he thinks.


22. Use All Your Horsepower
How big is your engine, and how efficiently do you put it to work? Warren Buffet suggests that lots of people have "400-horsepower engines" but only 100 horsepower of output. Smart people, in other words, often allow themselves to get distracted from the task at hand and act in irrational ways. The person who gets full output from a 200 horsepower engine, says Buffet, is a lot better off.


23. Avoid the Costly Mistake of Others
Buffet's friend and associate Charlie Munger always emphasizes the study of mistakes so as not to go there.


24. Become a Sound Investor
Buffet says that Ben Graham was about "sound investing". He wasn't about brilliant investing or fads and fashions, and the good thing about sound investing is that it can make you wealthy if you are in not too much of a hurry, and it never makes you poor , which is even better.

sources: James Pardoe, ISBN: 0-07-144912-4