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| Warren Buffet |
1. Do not invest in something we do not understand.
Each stock must be owned by a company. Find information about the type of company, who is managing it, and what strengths and weaknesses in the industry in which they operate. What are its competitive advantage, sources of raw material inventory, and the main markets served by the company. Those are some principles that continue to be held before Buffett decided to invest in the shares of a company.
2. Choose a share as we look for business partners.
Focus our search on a well-managed companies with sound business lines. This can be obtained from published information and news related companies. Buffett argued, "Look for big business to the economy can be understood, able to survive and seductive, and managed by the management that has the ability and oriented to the shareholders.
3. Make a safety margin.
Purchase of shares sold at a price far below its intrinsic value and buy as cheaply as possible. In an attempt to determine the price, the stock should be trading at a price far below its intrinsic value. Buffett warned, "Do not invest unless there is a fairly reliable basis that the price paid is substantially lower than the value produced."
4. The key to successful investing is to buy a sound business ownership when market prices are well below the value of its business.
In general, we only need to identify a good stock and worth to invest, then wait an appropriate time to buy. Then, when a good time to buy a stock?
Usually this occurs when a market is experiencing a peak is spinning downward. This is when most people are selling because of fears that the market will fall further and the stock sold as commodities that are not desirable, so that the people selling anything as they can. Usually at this time that a good stock will also be sold with a bad stock, and usually with a very low price. This is the time to start picking stocks.
5. Sticking with stocks that we have a policy of "till death do us part", which is sold only when the principles of corporate change.
Buffett's warning is very important to be repeated: "If you are not willing to own a stock for ten years, do not ever think to have it for ten minutes."
After doing four things as described in the article section 1, we only need to monitor whether the company is working on its qualities. Therefore, do not do anything unless there is fundamental change. Hold the stock that we have as long as we expect the business will continue to work properly and the company will be able to increase its intrinsic value at a satisfactory level. Do not be too actively manage our portfolio by trading it in and out of the market.
6. Do not diversify too much, but be prepared to bet big when we are very confident with the company that we have chosen to invest.
Buffett-style knitted not prescribe investment diversification. In fact, the principle requires the existence of concentration. According to him, the long-term investment success is not dependent on ownership of a diversified portfolio, but on self-awareness that an investor is a business owner. And if we believe in a business whose stock we buy, we should like to have more company stock.
So, instead of following the general policy of modern financial theory which states to "not put all eggs in a basket", Buffett said over and over again what Mark Twain wrote in Pudd'nhead Wilson (1894): "Put all your eggs in one basket-and watch that basket. "
7. See the market downturn as an opportunity to buy because it is usually during this time that the shares will be sold at a very low price.
Market conditions has decreased drastically, in fact, provide significant opportunities for investors to buy more shares at attractive prices. "The long-term investors will benefit from a decline in the stock market as a food buyer who would benefit from lower food prices," Buffett said. "So, when the market plummeted, as it always happens from time to time, do not panic and grief. Pick profit maximization."
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