Today we will continue with our look at Warren Buffett’s investing advice. We have changed around the format just a little bit, and will only share three more tips with you today. We will share the last four on Thursday, July 4, 2013.
Let’s get into it without any further delay…
It’s Simple to Invest… Kind of
You may be wondering what specific investing advice will Buffett has to offer, and in a nutshell, here it is…
“All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”
I bet you feel that Warren Buffett’s words make investing sound easy. Just remember that he’s not telling you to buy and hold stocks forever. You have to stick with companies that remain strong, and dump off the companies that falter when and if this happens.
Here’s another quick tip…
“Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now. Over time, you will find only a few companies that meet these standards – so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.”
That piece of advice share some very key concepts – as an example, you have to make sure to buy at very low at attractive prices, and make sure you choose companies that are quite easy to understand.
But it isn’t always simple, as you can see…
“When managers want to get across the facts of the business to you, it can be done within the rules of accounting. Unfortunately, when they want to play games, at least in some industries, it can also be done within the rules of accounting. If you can’t recognize the differences, you shouldn’t be in the [stock]-picking business.”
The big message to understand in this third tip is this… You must continue to learn and read. This will make you a much better investor. If you do not have the right amount of time to read and learn, then why Buffett recommends investing in simple index funds.
That’s all for today’s tips. We will close out this series tomorrow with four more tips from the billionaire investor. Thanks for reading and we will see you again tomorrow.