Buffett Investing
“Professionals Should Concentrate Their Bets, Amateurs Diversify”
Unfortunately, I’ve had to learn this the hard way. Here’s some more insights into Buffett’s strategies. And here.
And if you want to learn some more specifics into Buffett’s ways of investing, you should try this book written by Buffett’s mentor, Benjamin Graham. I’ve read it, it can get kind of slow (contains a lot of history about markets) and may be kind of dated, but it makes sense that a real investor have an appreciation of some history.
on June 7th, 2008 at 3:00 pm
When I first started reading Buffett, his methods made a lot of sense. Some advice from his various books:
1. Don’t diversify. Namely what you have listed above.
2. Discount cash flows using the simple risk-free rate.
3. Value and Growth investing are joined at the hip. You should be looking for prospects with incredible prospects for growth but at a good price. This concept seems simple enough, but you would be surprised at how many “professionals” and “investors” still think the two methods are different.
4. Use technicals to try and pinpoint an entry point. Yes, even Buffett professes to technicals for investing.
5. Buffett even admits that he is an anomaly amongst investors and implies that even if people mimicked what he did they may not be successful.
In addition, I find that Graham’s rules for investing the fundamental way are too strict. Buffett did as well which is why he started deviating and laxing some of Graham’s rules. Even so, I still think basing your reason for investing on fundamental decisions is flawed because of simple economics. Prices are and will always be driven by supply and demand. Fundamentals should be viewed as influencing the perception of price, not as a direct reason for it.