Daily Investment Tips

Warren Buffet is arguably the best investor in the world. Over the years Buffet has shared his ideas on investing. Most of this ideas are found in his annual letter to Berkshire Hathaway shareholders.

In this article I share some of the investment gems by Warren Buffet.These ideas can used as an investment guide to investing in stocks.

1. Buy and Hold.

This idea of buy and hold is synonymous with Warren Buffet. He buys into company’s and seems to hold the stocks forever.

2. Buy Stocks That You Understand.

Buy into companies which you understand their products and services. Warren Buffet is quoted saying “Stick to what you know. Bill Gates is a good friend, and I think he may be the smartest guy I have ever met. But I don’t know what this little things do. So I didn’t invest in Microsoft.

3. Always Have Spare cash

The reason why Buffet seems to do better then the rest is because he always has spare cash. During periods of crisis, he uses the extra liquidity to take advantage of opportunities.

4. Buy When Everyone is selling and Sell when everyone is buying.

He was quoted in 2009 saying “When it’s raining gold, reach for a bucket, not a thimble.”

5. Don’t Be Fooled By the Media Buzz / Euphoria

Charlie Munger his trusted lieutenant was quoted “avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be.”

6. List down your reasons for buying a stock.

When your force yourself to write down your reasons for buying a stocks it prevents you from making dumb decisions.

7. Understand The Behaviour of the Crowd

A simple rule dictates my buying: Be fearful when others are greed and greedy when others are fearful.

8. Understand The Value in the Business

As he said in 2009 letter to investors, “In the end, what counts in investing is what you pay for a business — through the purchase of a small piece of it in the stock market — and what that business earns in the succeeding decade or two.”

written by Constantine Njeru \\ tags: Berkshire Hathaway, Berkshire Hathaway Shareholders, Bill Gates, Buy And Hold, Buy Stocks, Charlie Munger, Crowd, Dumb Decisions, Euphoria, Futures, Good Friend, Greed, Investing In Stocks, Investment Gems, Investment Guide, Lieutenant, Liquidity, Media Buzz, Stock Market, Warren Buffet

Phil Donahue was interviewing free market economist Milton Friedman and wanted to know if Friedman had ever had a moment of doubt about “capitalism and whether greed’s a good idea to run on?” Friedman was quick in response:

“…is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history are where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear: that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”

Donahue then countered saying that capitalism rewards the ability to manipulate the system and not virtue. Friedman was having none of it:

“And what does reward virtue? You think the communist commissar rewards virtue? …Do you think American presidents reward virtue? Do they choose their appointees on the basis of the virtue of the people appointed or on the basis of their political clout? Is it really true that political self-interest is nobler somehow than economic self-interest? …Just tell me where in the world you find these angels who are going to organize society for us?”

written by Constantine Njeru \\ tags: American Presidents, Appointees, Automobile Industry, Bureaucrat, Capitalism, Commissar, Economist Milton Friedman, Free Enterprise System, Government Bureaus, Greed, Henry Ford, Market Economist, Michael Friedman, Milton Friedman, Moment Of Doubt, Ordinary People, Phil Donahue, Political Clout, Productive Activities, Self Interest