Get Rich the Buffett Way
Wise Words for Making Money from Warren Buffet
Warren Buffett is known for his quick one-liners and homely wisdom. Here are some words of wisdom on how to get rich.
Have a Margin of safety
A margin of safety means buy stocks at a price far below your best estimate for its intrinsic value.
In other words, when stock market trading don’t just buy great companies that make plenty of money, buy them when they are selling at a good or great price.
You Need “Focus” or “Intensity”
Both Warren Buffett and Bill Gates rate this as the most important key to their success.
Buffett not only has a brilliant business mind, he also has focus. He analyzes stocks for hours each day and has done for decades. Whatever you try to do you won’t get far without focus.
According to Buffett beginner investors should buy and hold index funds and ETFs, unless they are prepared to dedicate lots of time to individual stock picking. Even so, indexing should be the core of most portfolios.
Be fearful when others are greedy. Be greedy when others are fearful.
As Kipling says you need to “keep your head when all about you are losing theirs”(literally and metaphorically). This can lead to outsize returns as the markets swing back and forth.
Leverage is the only way a smart guy can go broke
Debt is dangerous. Have large amounts of cash set aside for when you might need it.
For ordinary investors, buying stocks on margin is risky. Just say no!
The “moat”
Buffett likes companies with “moats” i.e. durable competitive advantages. Coca-Cola’s moat is so strong Buffett believes a ham sandwich could run it.
Other companies Berkshire Hathaway likes that have large moats are :- Johnson & Johnson, Procter & Gamble, GEICO, and Wells Fargo.
The Snowball
This is the title of Buffett’s biography, because it sums up his life in two words. Buffett believes in the power of compounding over time. That means starting as early as possible, avoiding short-term risks (rule No. 1: never lose money), and letting investing returns build upon itself. The power of compound interest. He likes to take dividends in the form of more stocks too.
Warren Buffett Investing Advice
Warren Buffett Investing Tips
In his annual letter Warren Buffett gives some very interesting investing tips and as he is the 3rd richest man in the world with $47 billion it might be worthwhile listening to him.
1. Always have plenty of cash
Don’t put yourself in a position where you have to rely on the kindness of strangers. arrange your affairs so that any conceivable cash requirements can be dwarfed by your own liquidity.
High returns on high risks aren’t everything, cash provides low returns but is also low risk. So make sure you build a nice healthy cash pile.
2. Fear is your friend
Warren Buffett likes to say be greedy when others are fearful and fearful when others are greedy. It’s good old market commons sense
Another of his sayings is “When it’s raining gold, reach for a bucket, not a thimble”, which is what he did back in October 2008 and so far he’s been proved right.
Buy in bear markets not when the stock market is roaring away in a bull market.
3. Don’t believe the headline news
Warren Buffett is apparently a CNBC addict, but he always looks beyond the headlines:
In his annual letter for example he said “We are certain, that the economy will be in shambles throughout 2009 – and probably well beyond – but that conclusion does not tell us whether the market will rise or fall.”
News organizations however only quoted the first part of the sentence and totally ignored the end.
Warren Buffett sees this as terrible journalism, he wasn’t predicting at all what would happen to the stock market.
The financial media has one purpose – to entertain or terrify you to get you to watch so they can charge more for advertising (hell that’s what people do with blogs!).
4. You will make mistakes
You will never get everything right:
Don’t waste time blaming others just try to learn from your mistakes.
5. Appreciate your good fortune
Some people who try to get wealthy become bitter about others who have already made it, or judgemental about the poor.
Warren Buffett says he has been very lucky – he was born in America; had wonderful parents who gave him a good education; has had a great family and health; and has a “business” gene that lets him prosper in a disproportionate manner to many people who contribute just as much or more to society.
If you want to be like Warren Buffet, then count your blessings, do something you like that pays well and invest for the long-term.
As for the stock market today it is now up around 68% since the bottom in March 2009, Warren Buffett didn’t get the bottom exactly right but he has done well enough with his simple philosophy.
How to Beat the Markets
How to Beat the Stock Market – Formula Investing
Joel Greenblatt, wrote a book called “The Little Book That Beats the Market” in order to teach novice investors how to beat the markets. Greenblatt says he wanted to tell investors how to make money in terms even his kids could understand : “I figured if I could teach them how to make money for themselves, then I would be giving them a great gift.”
Joel Greenblatt has devevloped a formula that it is claimed will let you beat the stock market if you stick with it. Greenblatt’s formula is not unlike the “Warren Buffett way” i.e. “Invest in good companies when they are cheap.”
According to Greenblatt his formula has beaten the market for almost 20 years, from 1988 to 2004, with annual returns of nearly 23% from high-return/low-price stocks.
There are six easy steps to the formula and sucessful online trading
1. Stocks are classified each day using 2 criteria: Earnings Yield and Return on Capital which are used together to draw up a list of top-ranked stocks.
2. Stocks in utilities, financial services and smaller companies, are usually removed as are companies for which the data are incomplete.
3. A portfolio of a minimum of 20 stocks must be bought.
4. The portfolio is held for around 1 year to allow for certain after-tax returns considerations. If there are any losses these should be taken just before the 1 year anniversary, gains on the other hand are taken right after the 1 year anniversary.
5. The whole portfolio is sold after 1 year and a new portfolio is purchased.
6. Data show that if you apply this formula for at least 3 years this will allow it to work correctly irrespective of market fluctuations.
If you want to know more check out – www.magicformulainvesting.com or www.formulainvesting.com
Warren Buffett Back in Profit
Warren Buffett Does it Again
One of Warren Buffett ’s favorite phrases is to “buy when others are fearful and be fearful when others are buying”. This is what he did back in October when he started buying shares again. At the time there were plenty of people who once again said that Warren Buffett had lost the plot, but once again he proved them wrong.
He didn’t get it absolutely right, as the market didn’t hit bottom till March 2009 but all the same his investments are now back in profit and rising and the Berkshire Hathaway share price is also rising again.
Berkshire Hathaway returned to profit in Q2 of this year, as a result of gains on derivatives and stocks such as Goldman Sachs and GEC that Warren Buffett bought back in October .
Berkshire Hathaway reported a $1.5bn loss for the first three months of the year – its first loss since 2001 – in the second quarter however it showed a $3.3bn profit investment gains offset falling earnings.
Last year, Berkshire, reported a $2.9bn profit.
Berkshire Hathaway reported a $1.5bn gain on its derivative portfolio, more than twice the levels in Q2 of 2008.
Berkshire said its spending in the middle of the crash was very good, as distressed companies sold shares to raise cash.
Warren Buffett used his large cash pile to persuade companies to sell him preferred shares which pay high annual dividends, he was simply taking advantage of the financial crisis to buy at attractive prices.
Berkshire Hathway did however report a 22% year-on-year fall in operating earnings to $1.8bn.
Many people would like to emulate Warren Buffett and if they know nothing about the stock market they often woner how it works – if you are such a person check out this video how does the stock market work
Warren Buffett has also started a cartoon series to teach kids how to manage their money and how to invest it wisely – see Secret Millionaires Club
You should also learn about charting – stock market charts
Warren Buffett Lunch Auction
Warren Buffett Lunch Auction
The annual Warren Buffett lunch auction has just ended – last year the winning bid was $2.1 million, this year it only got as high as $1.6 million – a 20% drop which just about reflects the drop in markets overall. All the money raised goes to charity.
At more or less the same time Bernie Madoff was sentenced to 150 years in prison after his $65 billion Ponzi scheme – in which the perpetrator uses the money from new investors to pay the older investors, until of course the music stops and it all falls apart. Madoff has always maintaine dhe acted alone, but there are plenty of people who believe that this is not possible given the scale of the scam and the fact that it went on for over 20 years.
Meanwhile back in the stock market the DOW finished up anothe r90 points as it clings grimly on to the gains it has made since March – despite many people willing it to drop back to re-test the lows.
For info about understanding stock market charts see stock charts for beginners
Forbes Richest Americans
Forbe’s Rich List
Warren Buffett is only the 2nd richest man in the world having lost top spot to Bill Gates but still the world’s greatest investor who already has his retirement investing well provided for.
According to Forbes, both Buffett and Gates are worth $US20 billion more than Oracle’s Lawrence Ellison .
“With a net worth of $US57 billion, Bill Gates remains the richest man in America despite losing his crown to Warren Buffett for a few months this spring,”
“Buffett’s shares in Berkshire Hathaway have fallen 15 per cent since February.”
The housing crisis has also hit many billionaires
“Rising prices of oil and art paved the way for 31 new members and eight returnees, while volatile stock and housing markets forced 33 plutocrats from our rankings.
The 5 richest people in the US:
Bill Gates (Microsoft) – $US57 billion
Warren Buffett (Berkshire Hathaway) – $US50 billion
Lawrence Ellison (Oracle) – $US27 billion
Jim Walton (Wal-Mart) – $US23.4 billion
Rob Walton (Wal-Mart) – $US23.3 billion
It is also a well-known fact that Warren Buffett enjoys the simple pleasures in life like home-made ice cream – so I’m sure he would be interested in this page Ice Cream Makers
Tomorrow should be an interesting day on the markets as the stock market charts seem to be indicating that it is about time the markets stopped going up as they come up against resistance around 790 on the SP – so we shall see !
Buffett’s Annual Letter
Warren Buffett Annual Letter to be Made Available Saturday
Warren Buffett is to publish his annual letter on Saturday. In these difficult economic times peopl ewill be particularly interested in reading the thoughts of the Oracle of Omaha,
Warren Buffett’s annual letter to shareholders is due to be posted on Berkshire Hathaway Inc.’s web site Saturday morning, his office said today.
Warren Buffett generally likes to issue his letters on a Saturday so that investors can read it over the weekend before the stock market opens.
Buffett’s annual letter is widely read because of his frank description of Berkshire Hathaway’s dealings and his tendency to discuss a wide range of financial issues, in these strange financial times his thoughts will no doubt be looked at even more closely.
Warren Buffett has already spoken publicly about the issues, and he has been investing in equities since October but the annual letter will give him a chance to reveal his thoughts in greater detail. It’s unlikely that he will give any tips about cheap online trading but you never know, in these economically difficult times. saving money is very important.
Warren Buffett Investing Philosophy
Warren Buffett Investing Philosophy
Warren Buffett has become the richest man in the world by following a simple investment philosophy, namely long-term investing, buy and hold, value investing. and reinvesting the dividends.
He was a miilionaire by the age of 35 and now has a prsonal fortune of almost $60 billion.
For futher information about Warren Buffett check out these sites :-
Warren Buffett – Forbes
Warren Buffett – the Oracle of Omaha
Warren Buffet – Berkshire Hathaway
Warren Buffett News
Warren Buffett Secrets