First, make money instead of losing money. This
is sentence is often quoted by Buffett: "The first criterion of investment
is not to lose money; the second criterion is never to forget the first."
Because if you invest a dollar, lost 50 dollars Points, only half of the money
on hand, unless there are 100% of the proceeds, otherwise it is difficult to
return to the starting point. Buffett's biggest achievement was between 1965
and 2006, after three bears, and his Berkshire Hathaway only had a loss in a
year (2001).
Second, do not be deceived. Buffett likes
to use equity returns to measure the profitability of enterprises. The return
on equity is calculated by dividing the company's net income by the share
capital of the shareholders. It measures the percentage of the company's profit
as shareholder's capital and can more effectively reflect the company's
earnings growth. According to his value investment principle, the company's
equity return rate should be no less than 15%. Shares of Coca-Cola have more
than 30% of the shares held by Buffett, and 37% of American Express."
Third, depends on the future. Buffett
called by people "Omaha's Prophet", because he always consciously to
identify whether the company has a good future development, can’t continue in
the next 25 years to succeed. Buffett often said, through the window to look
forward, can’t see the rearview mirror. One way to predict the future of the
company is to calculate how much the company expects future cash receipts
today. This is the way Buffett assesses the company's intrinsic value. Then he
will look for companies that are seriously deviating from this value and sold
at low prices.
Fourth, invest companies that insist on
investing in a huge "barrier" to their competitors. Predict that
there will be risks in the future, so Buffett favors companies that can make a
huge "economic barrier" to their competitors. This does not
necessarily mean that the company he invests must be exclusive of a product or
a market. For example, Coca-Cola has never been a competitor. But Buffett is
always looking for companies that have a long-term competitive advantage and
make him predict the value of the company more secure. In the late 1990s, one
reason Buffett was reluctant to invest in technology stocks was that he could
not see which company had enough long-term competitive advantage.
Five, gamble on the big bet. On the vast
majority of value investors conservative nature, but Buffett is not. He
invested $ 62 billion in the stock market on 45 stocks. His investment strategy
is even more radical than this figure. In his portfolio, the top 10 stocks accounted
for 90% of the total investment. "This is in line with Buffett's
investment philosophy," said Justin Fuller, senior stock analyst at
Morningstar. "Do not hesitate, why do not you invest money on your
favorite investment?"
Six, have to wait patiently. If you change
hands in the stock market, then it may miss the opportunity. Buffett's
principle is: do not frequently change hands, until there is a good investment
object before the shot. Buffett often quoted legendary baseball batsman Ted
Williams as saying: "To be a good batsman, you have to have a good shot to
play." If there is no good investment object, then he would rather hold
cash. According to Morningstar, cash in Berkshire Hathaway's investment ratio
accounted for more than 18%, while most fund companies only 4% of the cash.
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