Warren Buffet is hands down the most successful stock market personality of all time! You can’t just argue with success! His methods are practical, simple, and easy for everyone to comprehend. He was one of the first people I followed, studied, and up until now still admire. I believe he is a good template for a lot of newbie investors to follow as his methodologies adhere to discipline, strategy and conviction.
Catch me in my live training events! (quick plug)
The heart of why I do this seminars is I want to build a generation of Filipinos with the right foundation in stock investing. I want to bring smart investing to every Filipino around the world! If you would like to know more on how you could time the market checkout the trainings below.
Stock Smarts Davao — October 20 – October 22, 2017
Stock Smarts Malaysia — November 4 – November 5, 2017
Stock Smarts Sydney, Australia — November 11 – November 12, 2017
Stock Smarts Qatar — November 16 – November 19, 2017
Stock Smarts Singapore — November 25 – November 26, 2017
Stock Smarts Manila — December 2, 3, 9, 10 & 16 , 2017
Stock Smarts Taiwan — December 21 – December 22, 2017
Stock Smarts Cagayan De Oro — January 13 – January 14, 2018
Stock Smarts London, United Kingdom — January 26 – 28, 2018
My desire is that as you go about your saving and investing, like Warren Buffet, you develop your own discipline, strategy, and conviction so you rely less on rumors and base your decisions from your own analysis. The five tips for this post are catered more for investors than traders. I will do another post in the future for traders.
For this edition of our Fast Five Series, here are Five Warren Buffet Stock Strategies:
“Wide diversification is only required when investors do not understand what they are doing.”
The more diversified your portfolio is, the more you miss out on great movements of a stock. If you study your stocks well why not focus and put more on stocks that you believe in and have full conviction on. Why would you want to by a stock if you are not whole heartedly set at buying it? My take on it, if you are not convinced in buying a stock then stay in the sidelines and don’t buy it at all. Don’t use diversification as a fallback plan because you are not too sure about the stock or you did not study it well.
If you are trading, it would be good to have 1-2 stocks that you buy and focus on. While if you are investing, the size of your portfolio will also determine the number of shares that you buy. Do not buy more than 10 common shares if you are investing for the long term.
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Buy great companies! Warren Buffet loves great companies that have a great record of profitability! In our seminars, I always tell our clients to focus on companies who’s earnings are growing over a period of time. You don’t want to buy just a mediocre company at a cheap price but have no assurance of how the earnings will be 3-5 years down the line.
No! You want a company that is good and growing! Because you have a firm conviction that it will continue to grow through the years! If you are investing for the long term, why buy SLI and FLI if you can buy ALI and SMPH?
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Stock Investing is all about the company behind the stock. What will make you sleep well at night is knowledge that the company will do well even if the stock market is closed and you have no access to it. That even if you don’t have access to it for 10 years but because the company is so good, it should not even matter because you know that after 10 years the company will be in a better place than where it was before and when the stock market opens you will be in a much better position!
“Our favorite holding period is forever.”
The only time you sell a great company is when you see the fundamentals change. Why sell a good company if you know the underlying conditions that the company is still, growing, efficiently managed, cheap, properly leverage, liquid and is a market leader.
As long as all the fundamental conditions telling you to hold on to your stock are still there why should you sell? Sometimes amazing stocks like JFC, ALI and SMPH are just worth holding for long periods of time because they are such great businesses. Don’t just rely on your emotions, it will kick you down and make you lose money.
“If a business does well, the stock eventually follows.”
The stock price always follows the profitability of the company. No matter how the stock is beaten down it will always go back up if the earnings of the company are doing well. On the flip side the company can be in amazingly long uptrends because the fundamentals of the business dictate that even at a premium, the stock is worth buying still because of its amazing prospects.
Think about Apple, Amazon, Facebook, Google and so many other tech stocks that changed the status quo of the tech industry because of the way they do business. By no means are these stocks cheap but because their businesses are doing so well the stock also keeps on trending higher.