In the trying times of market meltdown and global recession looking inevitable it looks to me as if it’s the right time to follow buffettology (Warren Buffet’s philosophy).
Warren Buffett the greatest investor and philanthropist of modern times is disciple of Benjamin Graham ,the founder of value investing philosophy .Value investors look for securities with prices that are dramatically low compared to there worth i.e value investors seek products that are of high quality but underpriced.
He chooses stocks totally on the basis of their overall potential as a company . When Buffett invests in a company, he isn't concerned with whether the market will eventually recognize its worth; he is concerned with how well that company can make money as a business.
So his idea is buy a stock or say business thinking that share market might be closed for 10 years. Although the share market will be closed but the sound business you have invested in will keep on growing irrespective of markets.
Buffett typically only considers that have been around for at least 10 years.
As a result, most of the technology companies wouldn't get picked up by Buffett.
Another point to focus here is Buffett will invest only in a business that he fully understands.
He says never underestimate the value of historical performance which guides you about the company’s capabilities to increase worth of its investors. But remember that the past performance of a stock does not guarantee future performance.
He believes that its better to invest in companies dealing in cola ,chewing gum than to an technology company as people will never stop chewing gums or drinking coke.
Some of the important Quotes from buffet to remember and follow:
1. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
2. You should invest in a business that even a fool can run, because someday a fool will.
3. Never invest in a business you cannot understand.
4. Investing is laying out money now to get more money back in the future.
5. If a business does well, the stock eventually follows.
6. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
7. For some reason people take their cues from price action rather than from values. Price is what you pay. Value is what you get.
8. Risk comes from not knowing what you're doing.
9. All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.
10. Wide diversification is only required when investors do not understand what they are doing.
11. What we learn from history is that people don't learn from history.
12. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.
13. You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.
14. The best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago.
15. Diversification may preserve wealth, but concentration builds wealth.
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