Warren Buffett’s Top 10 Investing Tips
Below is Warren Buffett’s top 10 nuggets focusing solely on his area of unquestioned expertise – investing, NOT trading:
1. The Snowball
Buffett’s definitive biography, “The Snowball,” is titled so because it sums up his life in two words. Over everything else, Buffett believes in the power of patiently compounding over time. In investing, that means starting as early as possible (he started as a pre-teen), avoiding short-term risks even if it means lower possible returns (rule No. 1: never lose money), and letting investing returns build upon itself.
2. The concept of a “moat”
Buffett looks for companies with moats, or sustainable competitive advantages. The strength of Coca-Cola’s moat (its brand) is why he believes a ham sandwich could run it. The stronger a company’s moat, the more likely it will be a leader for decades rather than years. For examples, see some of the other companies Berkshire Hathaway owns a significant stake in: Johnson & Johnson, GEICO, Procter & Gamble, and Wells Fargo.
3. “Leverage is the only way a smart guy can go broke.”
Buffett believes debt is dangerous. That’s why you can have banks rife with Harvard MBA’s (hello, Goldman Sachs and JPMorgan) that are always a few days away from bankruptcy via a crisis in confidence.
4. The concept of inner scorecard vs. outer scorecard
“If the world couldn’t see your results, would you rather be thought of as the world’s greatest investor but in reality have the world’s worst record? Or be thought of as the world’s worst investor when you were actually the best?” Those who answer the latter have an inner scorecard. They’ll have the ability to be a true contrarian, ignoring the world’s judgment and focusing on long-term results.
5. “Intensity is the price of excellence”
When asked what the most important key to his success was, Buffett answered “Focus.” Microsoft founder Bill Gates answered the same way. Buffett reached his current heights not only because of his brilliant mind, but also because of a focus that has had him analyzing stocks for hours on end, just about every day, for decades.
6. A stock is the right to own a little piece of a business
Buffett’s mentor Benjamin Graham’s idea. We frequently divorce a stock from its underlying company, especially when Mr. Market is delivering up a volatile stock price. Remember, though, that in the long run, a stock is only as good as the company backing it up. Kind of like how a promise is only as good as the person making it.
7. Don’t fall into the false precision trap
“We like things that you don’t have to carry out to three decimal places. If you have to carry them out to three decimal places, they’re not good ideas.” It’s important to keep the big picture in mind. A 20-tab Excel model that calculates a company’s value on a discounted cash flow basis is useless unless you understand the business enough to feed in good assumptions. When Buffett made a killing on PetroChina earlier in the decade, the mispricing was so obvious that his only due diligence was reading its annual report. Not recommended for mere mortals, but you see his point.
8. “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Remembering the Buffett concept of an inner scorecard, and the Rudyard Kipling admonition to “keep your head when all about you are losing theirs,” can lead to outsize returns as Mr. Market sways back and forth.
9. Margin of safety
As with many of his most beloved tenets, Buffett got this one from his mentor, Benjamin Graham. A margin of safety simply means buying in at a price well below your best estimate for a stock’s intrinsic value. In other words, don’t just buy names like Visa and Johnson & Johnson because they are great companies with strong moats. Go the extra step, and only buy them when they are great companies selling for good to great prices.
10. “A ham sandwich could run Coca-Cola.”
Believe it or not, that’s a compliment to Coke. It speaks to why it’s Berkshire Hathaway’s biggest stock holding. As Peter Lynch put it, “Go for a business that any idiot can run — because sooner or later, any idiot probably is going to run it.”
Source: Motley Fool
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
2 People Have Something To Say Join In The Discussion!Earth Hour 2010
Earth Hour started in 2007 in Sydney, Australia when 2.2 million homes and businesses turned their lights off for 1 hour to make their stand against climate change. Only a year later and Earth Hour had become a global sustainability movement with more than 50 million people across 35 countries participating. Global landmarks such as the, Sydney Harbour Bridge, The CN Tower in Toronto, The Golden Gate Bridge in San Francisco, and Rome’s Colosseum, all stood in darkness, as symbols of hope for a cause that grows more urgent by the hour.
In March 2009, hundreds of millions of people took part in the 3rd Earth Hour. Over 4000 cities in 88 countries officially switched off to pledge their support for the planet, making Earth Hour 2009 the world’s largest global climate change initiative.
Earth Hour 2010 will take place on Saturday 27 March at 8.30pm (local time) and is a global call to action to every individual, every business and every community throughout the world. It is a call to stand up, to take responsibility, to get involved and lead the way towards a sustainable future. Iconic buildings and landmarks from Europe to Asia to the Americas will stand in darkness. People across the world from all walks of life will turn off their lights and join together in celebration and contemplation of the one thing we all have in common – our planet.
I am doing my part to save our planet. I hope you will too 
Doing The Dead Cat Bounce? DOW 5,000 in 2010? – Robert Kiyosaki
Dow 5,000 in 2010?
In my last column I predicted a “dead cat bounce” in the stock market and a possible Dow plunge to 5,000 this year. Obviously, many readers mocked my prediction.
But the dead cat bounce is very important, especially in today’s market.
Simply put, ‘a dead cat bounce’ looks like Diagram 1 below:
The market crashes, rebounds, and runs out of steam, then crashes again…unfortunately, and possibly, to a lower low. When professional investors observe a ‘dead cat’ forming, many will begin to sell. If their selling leads to a panic, the stock market goes even lower.
Putting today’s numbers to the ‘dead cat’ diagram gives this topic more meaning.
In 2002, the Dow hit a low of 7,286.
In 2007, the Dow hit a high of 14,164
In 2009 the Dow fell and stopped at 6,547.
Dow 6,547 is where the market stopped falling and the dead cat bounce began. At 6,547 the market was oversold and buyers came rushing back in, looking for bargains. The Dow headed back up, and a bear market rally began.
On February 5, 2010 the Dow closed at 10,012.
What Does This Mean?
So the question is, “What do these numbers mean to me?” The answer to that question depends upon you. If you are a bullish person, you will be optimistic, reassured by these numbers, and looking forward to the Dow breaking 14,000 soon.
If you are bearish, you will be waiting for the dead cat to finally die and for a double dip recession to begin.
One of the theorists (and writers) I follow is Richard Russell, a wise sage who is in tune with markets and the madness of crowds. He has been in the business for about 50 years, so he has the wisdom and perspective of time. Lately, he has been writing about the ‘50% Rule’ of Dow Theory. I thought I would pass it on to you because it may assist you in seeing the future of the economy, even if –like me — you do not trade in stocks.
The following is my interpretation of the ‘50% Rule’ using real numbers.
In 2002 the low of the Dow was 7,286.
In 2007 the Dow hit a high of 14,164.
The ‘50% Rule ‘number is 10,725…the halfway point between 7,286 and 14,164.
In 2007, when the market headed down and broke 10,725, professional traders who follow the Dow Theory ‘50% Rule’ knew what was going to happen next. On March 9, 2009, the crash stopped at Dow 6,547.
On that day, what I believe is a ‘dead cat bounce’ began as the market moved up.
On January 19, 2010, the Dow stalled at 10,725 and headed down again. This is spooky. The 50% rule came true.
The next interesting point is 7,286, the low of 2002, when the rally began. According to Russell, if the Dow holds at 7,286 and begins a rally, this might be a good time to buy. But if it fails to hold at 7,286 and slides past 6,547, then look out for dead cats dropping from the sky. Russell predicts that Dow 1,000, the number at which the Dow began its rally in the 1970s, may not be out of the question. If that happens, there will be millions of baby boomers joining the dead cats falling from the sky as their 401(k)s and IRAs implode.
Other Markets
This ‘50% Rule’ may apply to other markets such as gold, the hot commodity of this era.
In 1971 gold was $35 an ounce. I began buying gold in 1972 when I was a pilot in Vietnam, watching the Vietnamese panic when they knew the U.S. was not going to win the war.
Gold hit a peak of $850 an ounce in January of 1980.
Gold dropped to a low of $252 in July of 1999. Obviously, I bought a lot of gold in 1999. Gold was at an all-time low because Central Banks, such as the Fed and the Bank of England, were dumping gold in an attempt to protect the value of their counterfeit currencies.
According to the ‘50% Rule’ of Dow Theory, when the price of gold was passing $600 an ounce(halfway between $850 and $252), a rally in gold was on. When gold passed $600, mainstream financial experts began warning of a crash in the price of gold… stating that gold was in a bubble.
Today gold fluctuates between $1,000 and $1,200 an ounce.
Is Gold in a Bubble?
When you factor in inflation and devaluation of the U.S. dollar, $850 gold in 1980 is $2,500 an ounce in today’s dollars. In other words, gold might be at 50% at $1,200, which is the highest of highs. Could there be a run to $2,500?
Your personal answer to that question will depend upon how confident you are in Fed Chairman Ben Bernanke, President Obama, and Wall Street. If you have faith in our leaders of commerce, don’t buy gold. If you do not have faith in them, maybe you should buy gold or silver.
If the dead cat bounce dies and the Dow drops to 5,000 in 2010, as I predict, then the price of gold and silver may die with the dead cat of the Dow, as investors cling to cash. The next question you need to answer is, “If the Dow dies and the price of gold and silver drop, what should you invest in at the bottom…stocks, gold and silver, or cash?”
I know what I will do. I will buy more gold and silver. Why? The answer is because I trust gold and silver more than Central bankers, the Oval Office, and Wall Street. Gold and silver have been real money for thousands of years.
The Lost Decade
The people I am most concerned about are the average investors who have bought their financial planner’s advice of “Invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds.”
Many investors are calling the past 10 years The Lost Decade. That means those who invested for the long term in stocks, bonds, mutual funds, and cash are long-term losers. Japan has been in a Lost Two Decades.
A ‘lost decade’ means:
1. Zero job creation.
2. Zero economic gains for the typical family. Home values are down and many families owe more on their home than the home is worth.
3. Zero gains in the stock market.
Over the next few months, it is important to watch both the Dow and gold. As I write, the Dow is around 10,000 and gold is at $1,000. If the Dow breaks 7,286, the 2002 low, and continues down below 6,547, the 2009 low, watch out below. If 6,547 is broken and gold passes $2,500 an ounce, you’ll have even more to worry about.
Source: Yahoo Finance
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
The Biggest Achievement In Life Is To Learn And Emerge Stronger From Failures!
“Ring Of Fire” – Bill Gross, No.10 in 25 Most Powerful People In Business And 3 Times “Fixed Income Manager Of The Year”
Bill Gross is the managing director of PIMCO—one of the world’s largest fixed-income asset management companies, with $1,001 billion in assets under management as of the end of 2009. He has being ranked No. 10 in Fortune magazine’s list of the 25 most powerful people in business. In 2007, he was named “fixed-income manager of the year” by Morningstar for the third time in 10 years.
In his February online investment outlook letter, entitled “Ring of Fire”, Gross lumps the U.S. in the “ring of fire” along with vulnerable countries such as Spain, Greece, Italy, Ireland, and the U.K. in terms of investment risk. He said all these countries have government debt approaching 90% of GDP!! And this, says Gross—citing a book by Carmen Reinhart and Kenneth Rogoff called This Time is Different—is bad news, as such high debt levels slow growth by 1% or more, slashing returns on investment and on financial assets.
Gross also cites a McKinsey Global Institute study titled “Debt and deleveraging: The global credit bubble and its economic consequences.” It looks at total debt, public and private, and concludes that countries that enter financial crises with lower initial debt levels can respond far better—explaining why India, Brazil, China, and Canada were relatively shielded from the recent financial downturn.
Gross advises investors to put growth and currency assets in developing economies, especially in Asia. He wrote: “When the price is right, go where the growth is, where the consumer sector is still in its infancy, where national debt levels are low, where reserves are high, and where trade surpluses promise to generate additional reserves for years to come. Look for a savings-oriented economy which should gradually evolve into a consumer-focused economy. China, India, Brazil and more miniature sized examples of each would be excellent examples.”
Similarly, he recommends investing fixed income assets in those same countries if possible, though, since emerging markets have less developed financial markets and lower liquidity, fixed-income investors may need to turn to developed economies. His top choice for now would be Canada, because its “conservative banks never did participate in the housing crisis and it stayed closer to fiscal balance than any other country.” His next choice is Germany. The one to avoid at all costs: the U.K.
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Do You Have Something To Say? Add Your Comments Here!My Contributing Article For Moolah.asia, the 1st Flipping Financial Magazine Online!
Hope that everyone enjoyed their long Lunar New Year! After a long holiday, it is now time to get our engines running again and strive towards our goals for the Tiger year. I’ll like to start my blog rolling with a piece of good new – I’ve been invited to be a contributing writer to this online financial magazine – MOOLAH.asia
My very first contribution is a chapter extracted from my eBook (if you have not subscribe for it, you can do so for FREE at the bottom of this page) which I re-wrote to cater for their Valentine’s Day theme. Wow, I never thought that I could really write before starting my blog, and now I’m invited to be a writer! Of course, I must first thank all of you for showing support to my blog, that really gave me a whole lot of encouragement and confidence
Due to my agreement with the MOOLAH.asia folks, I can only publish part of my article below. But not to worry, MOOLAH.asia is a FREE magazine, so you can access my article along with the other interesting content simply by registering at their magazine site.
I’m extremely excited about this new online venture and it is definitely a great motivation for me to continue writing. Now, let’s take a peek at my virgin editorial contribution:
Why You Should Never Fall In Love With Stocks
Love is an integral part of our life and we should show our love to people we care for – our spouse, parents, children, siblings, friend etc. But as a trader, bear in mind this golden rule in the stock market – NEVER fall in love with stocks!
Just because you are working in a specific company or have made money from a certain stock before does not mean that you should buy and hold onto the stock blindly. Buying and selling decisions in the stock market need to be made with logic and reason, not with emotion.
Let’s take a look at Cosco Corp below, which used to be a hot potato in the Singapore stock market. Note that the phrase ‘used to’ signifies that its glorious days are already history.
Cosco Stock Chart
The Ship That Sank Along With Their Money
Cosco is a famous shipping company in Singapore, and its stock has enjoyed spectacular ratings from several analysts and broking houses. Cosco’s share price has been climbing up since its IPO days and whoever bought it during its early days would surely have loved Cosco like crazy! However when its earnings started to decline during the 2007 financial crisis, a lot of people did not pay attention to how overpriced the stock really was.
The shareholders of Cosco were probably thinking “Come on, the price has fallen this much already, how much lower can it go?” Even when the stock dropped to S$6 from a high of S$8.20, they continued to reassure themselves that “good companies will always rebound” and “you just have to be patient in the stock market”.
Come On, It Can’t Go Any Lower.. Can It?
Sad to say, thousands of shareholders who believed in the “it can’t go much lower” theory was proven to be wrong over and over again each time the share price breaks a new low in front of their eyes………….
…………………………………………………………………………………………………………..
The MOOLAH.asia guys forbid me to reveal any more than this, so please visit their magazine site and subscribe for FREE to read on 
May the trend be with you guys! Cheers
To your Dream,
Derick
“Dreampreneur” – Engineer Your Dream. Be an Entrepreneur.
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- Mistakes Made When Buying A House
- Daryl Guppy: Dow May Crash to 7,500 If 10,600 Not Breached
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