I saw this article about Warren Buffet’s overall investment strategy. The article goes in-depth on each point to explain the logic and use examples. I listed the tips below
- Don’t be in haste, invest in what you know well
- Don’t compromise on the quality of business
- Buy a stock with the plan to hold it for life
- Diversification may sometimes put you in danger
- Distinguish between news and noise
- It’s not rocket science, but there is no magic button
- Distinguish between price and value
- Sometimes the best moves may not be that exciting
- For anyone, low-cost index funds may be the most sensible move
- Just listen to those whom you can trust
Saying ‘pass’ to a complicated or difficult to understand business seems to be fairly straightforward, but when it comes to identifying businesses quality, it seems to be a challenging affair. The investment philosophy of Warren Buffett had evolved for above 50 years now, and as we can see, if revolves mostly around acquiring shares of the high-quality companies with expected long-term growth and opportunities.
Considering his insights, Berkshire Hathaway in the textile industry was one of the worst investments he has made. He was enticed to purchase it as the price looked cheap. At that time, his assumption was that there will usually be some good news waiting if you purchase a stock at a fairly low price, even if the long-term performance of it remains troublesome.
What do you guys think about these? I was really interested in seeing the logic behind the point about diversification, since it’s generally thought of as a useful tool for mitigating idiosyncratic risk. How applicable are these tips to the general investor?
