Investment U
HomeArchivesThe ExpertsReportsTools of the TradeRetirement Planning
September 4, 2008

Invest Like Warren Buffett

The Investment U E-Letter: Issue # 174
September 26, 2002

Invest Like Warren Buffett: A Simple Yet Powerful Philosophy for Investing
B
y Dr. Steve Sjuggerud, Chairman, Investment U

Legendary investor Warren Buffett said yesterday in London that things aren't that bad right now, and that the stock market is "way out of sync with the economy."

When the greatest investor on the planet is optimistic, that's as bullish a sign as you'll find anywhere.

Warren Buffett became the second wealthiest man in the world (with $36 billion) by investing with one simple principle: He only invests in businesses he understands, and at prices so cheap that there's plenty of margin for safety if things go wrong.

You, Too, Can Invest Like Buffett…Using His Simple Yet Powerful Philosophy

We've touched on these points before…but Warren Buffett has built a fortune based on a few simple ideas that anyone can follow.  Let's break Buffett's basic investment philosophy down into two parts.  You can use it to test your own investment decisions:

1. According to Buffett, you need to invest only in a business you understand…and NOT in companies you hear about at cocktail parties.  Bottom line - if you don't know what the company does then you shouldn't invest. It's your money. Take the time to do the homework and research on any company you're considering investing in. Plenty of free tools are out there on the Internet to help you to this end.

2. Buffett also believes in buying cheap.  Admittedly, the idea of "buy low, sell high" is easier said than done.  But the point is a valid one: by buying "cheap" on what you invest in, you greatly reduce the chances of losing money.  Think about it: you shop around for the best prices on nearly everything you buy. Likewise, why wouldn't you do the same with your investments?

Warren Buffett's Take on the Recent Market Declines: "Nothing Frightening"

When asked about the recent stock market declines, Buffett said: "I find nothing frightening about it at all.  If I own a good business, I don't really care whether the markets open tomorrow."

"I have no idea what business is going to do next month or next year," Buffett continued.  "I don't think it's important whether you're confident about tomorrow or next week."  Warren added that his confidence comes from taking a long-term view of the investment market and the economy.

"If the economy does well over a long period, markets will do well over a long period," he said. "In the short run, the market's a voting machine and sometimes people vote very unintelligently. In the long run, it's a weighing machine and the weight of business and how it does is what affects values over time."

Buffett in Conclusion

Much has been written about Warren Buffett in the last 20 years.  Yet these few paragraphs sum up his simple investing philosophy.  If he'd been asked these same basic questions 20 years ago, at the beginning of the great bull market, his answers would have probably been exactly the same.  If you're looking for comfort today, take it in the fact that the greatest investor of our time likes the market forecast and remains bullish.

One of the real keys to successful investing is having your own investment philosophy and sticking with it.  If you don't have one yet, you may want to borrow Warren Buffett's.  From zero to $36 billion in worth, I'd say it's done okay for him…

Sign up for the free Investment U e-letter

Today's IU Crib Sheet

  • A final point about what Warren Buffett had to say: Taking a long-term view of the market and the economy is very important.  In today's world of real-time stock quotes, daily market analysis and the like…it's very easy to become clouded by the news of the day (or the week.)  But remember: if you're investing for the long run…you need to take a long-term view of the stock market.  Try to avoid making hasty decisions based on the events of a few days or a few weeks.

Good investing,

Steve

Related Articles:

Return to Archives

 

We Value Your Privacy

Search Investment U

Full Index of IU Articles and Free Reports



Learn More About The Oxford Club

Investment U is the educational arm of The Oxford Club - one of the world's most distinguished investor networks, with a long track record of success. The Hulbert Financial Digest recently ranked the Club's twice-monthly Communiqué one of the Top 10 investment newsletters nationwide, based on performance. Overall, the Club's portfolios rank 3rd for five-year, risk-adjusted return. Learn how to become a member of The Oxford Club for as little as $79.
RSS Feed

The Investment U RSS News Feed!
The Investment U RSS Feed

The Road Map to A Rich Life
The Road Map to a Rich Life

The IU RSS Feed Powered by FeedBurner
What Is RSS?

Recommendations


Conferences

SEE THE FULL LIST OF IU
EVENTS & CONFERENCES

Investment Books

Visit the Investment U Book Store to see what the experts are reading. 


Home | About IU | Investment U Archives | Investment Research Reports | IU Resources | Site Map

Copyright © 1999 - 2008 by The Oxford Club, L.L.C
Contact Information  -  Privacy Policy  -  Disclaimer  - Public Relations  - Link to Us

Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation.  No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.