Here are four investment principles that Warren Buffett has typically used to make investment decisions throughout his career. Think of this as a template you can use to figure out how to buy stocks that have the potential to make you a lot of money in the stock market:

1) Understand the business in which you are investing. You cannot make money in the stock market unless you understand the basic fundamentals of the business whose stock you are purchasing. Look for businesses within your circle of competence. But remember, having a large circle of competence is less important than having one with a well-defined perimeter.

2) When you evaluate a stock you want to buy, look for sound fundamental economics. Most investors need to think about companies that have a substantial economic advantage. In some ways, you can think of this as a castle with a large moat around it. For example, Coca-Cola’s brand name has represented thirst quenching enjoyment for generations. No competitor can buy this type of bread loyalty for any amount of money.

3) It is critical that the company whose stock you are considering buying have competent leadership. The overwhelming majority of companies with a sustainable economic advantage need honest, capable leadership if the company is to maintain its lead in the marketplace. That is the only way in which you can keep the business viable and profitable over the long-term.

4) People who want to know how to buy stocks need to realize that buying at the right price is critical. Your purchase must be made at the right price if the investment is to pay off over the long term.

In summary, those who want to know how to buy stocks needs to (1) understand the companies whose stock they are considering buying, (2) the stock must have favorable long-term potential, (3) the company you want to invest in must be managed by smart leaders, and (4) you need to buy the stock when the price is low enough to offer you a phenomenal return on investment.

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At the age of 25, Warren Buffett began a limited stock market trading investment partnership. Warren Buffett was the general partner, and started with US$100. There were seven limited partners who contributed US$105,000 towards the stock market trading partnership.

The limited partners received 6 percent annually on their investment and 75 percent of the profits above this target amount. Warren Buffett earned the other 25 percent. Over the course of the next thirteen year period, Warren Buffett compounded money at an annual rate of 29.5 percent through stock market trading activities. This was amazing, because during that same thirteen year period, the Dow Jones Industrial Average declined in value five different years within the same thirteen year period.

In 1969, Warren Buffett thought it best to end the stock market trading investment partnership because he thought the stock market had become very speculative. Over the past thirteen years, Buffett’s share of the investment partnership had grown to be worth over US$25 million.

Warren Buffett has had one of the longest and most successful stock market trading careers of all time. While he’s considered the “world’s greatest value investor,” there’s another side to Warren Buffett that is not very well known by most people. Although he has gained recognition for his value investing approach to the markets, the fact is that nobody — over the past fifty years — has traded and invested with a more diverse group of stock market trading strategies than Warren Buffett.

Given the fact that Buffett’s investment career has spanned five decades and multiple styles and disciplines, is it possible to trade like Warren Buffett? It’s impossible to trade exactly like Buffett does, but with continued study and patience, you can come close.