Warren Buffet is recommending buying or investing in stocks instead on bonds. From a Motley Fool blog post:-
E. William Stone is the chief investment strategist at PNC Wealth Management in Philadelphia. William Stone Financial Advice In businessweek interview the man gave his thoughts on why this is the best time to be investing in stocks.
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.”
Successful investing in stocks is never easy because of the many factors that affect a stock. In this article I outline the 10 factors that you need to go through before buying a stock. 1. Understanding the Services or Products the company sells. Buy stocks of companies that you understand. If you cant figure out what the company sells it is impossible to understand the companies financial s. 2. Understand How to read a Companies Balance sheet and Income statements. Drop by your local library and borrow a simple guide to accounts or economics and read pages on business finance. If you cant crack it on your own hire a tutor. 3. Understanding the Sector / Industry Understand the number of players in the sector and the position of your target company. If the company is the market leader it has advantages. 4. Understand how the company will make you money. Figure out why the company will outperform. How they launched new products that will do well? Are they expanding abroad or into new markets? These are the factors that keep a company stock rising. 5. Understanding that stocks go up and down. Its important to know stock prices do not go up in a straight line. Stocks prices sometimes go down. When they they drop don’t panic and sell. 6. Take advantage of free online tools. Free online tools such as Google finance and yahoo finance can help you a great deal in doing your stock purchase research. 7. Investing for dividends. Some stocks are in mature industries. These stocks have few opportunities for price appreciation. But the good thing about them is that they pay annual dividends. Such industries are mining, oil and tobacco. 8. We All Mistakes. Even after going through the best research mistakes will be made. When you realise you made a mistake the best thing to do is to cut your losses. Sell the stock and invest the money in a new stock. 9. Diversify You Stock Purchases You have heard it since you were a kid “Don’t put all your eggs in one basket.” Don’t put all your money in one stock, spread the money in different stocks. This will protect you from large losses. 10. Have an exit strategy. Have a targeted share price you want to reach before selling all or part of your position? If you reach your target share price, stick to your initial plan and cash out at least some of your position. While this stock investment guide is by no means exhaustive, it will certainly help you begin your thought process when making a decision to buy a specific stock or not. |
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