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According to Warren Buffett, don't buy a stock, buy a (part of a) business: Find a good business to buy. If the price is right, buy it. It's like buying anythin

by 13ren 18y ago

According to Warren Buffett, don't buy a stock, buy a (part of a) business: Find a good business to buy. If the price is right, buy it. It's like buying anything, really. In a market where all stock prices have fallen dramatically, you'll be able to buy it cheaper than before - but note, it might still be too expensive. The trick is in recognizing a good business and valuing it - but that's much more doable than deciding whether to "buy stocks", because it's more definite and specific. To put it in perspective: it's what ycombinator does.

eleitl 18y ago
Warren Buffett (assuming his performance is not due to chance) buys things he understands. He also has deep pockets. For normal investors, in ordinary times one should pick up an index fund (roughly one third of your total investments, the rest of them are not stocks) and hold unto them until you retire. The formula can be bend slightly depending how far you are from retirement. Of course these are not ordinary times.
- tyn 18y ago
  As I have pointed out before, "deep pockets" is actually a disadvantage
  - netcan 18y ago
    When they're that deep it is. But enough to buy a controlling stake in mid sized companies, that not. Happy middle's where you want to be.
  - 13ren 18y ago
    Yes. Warren Buffett has gone on record saying that if he only had a million dollars to invest (as opposed to umpty billion dollars), he was sure he could double it in a year. His problem is that there just aren't that many multi-billion dollar investments around, and those that are, are well known, and therefore accurately priced. Maybe also, for the same reason, it's hard for a massive company to keep growing (a smaller co has more room to grow). With a million or less, he could assess the small companies that aren't covered by analysts and so on, to find one that was (1) great (2) cheap The lack of money is not the deficit that stops you (and me). Mostly, it's effort, and self-confidence in your own considered opinion when it is contrary to everybody else. To buy when others sell - because you've done the research, and trust your judgment. It's mostly an emotional or moral quality. If your judgment is wrong, you have a lovely learning experience that cannot be obtained in any other way (and Warren Buffett has had that experience).
    - tlrobinson 18y ago
      He should have a little fun and set aside a million bucks to try to double each year. It's not like he can't make smaller investments just because he has billions of dollars. Of course if he announced which stocks he picked at the time he purchases them the price would probably increase. Heisenberg and all that... I often wonder if people like Jim Cramer end up manipulating the market just by talking publicly. And is it illegal? If Cramer says "I just bought such and such stock and think it's a great buy", and the price goes up because of it, and he sells his shares for a profit, is that illegal? He simply stated a fact and his opinion. Where is the line drawn?
      - imgabe 18y ago
        I think the SEC has rules about when people like Jim Cramer are allowed to buy and sell stocks that they talk about publicly. He wouldn't be able to buy a bunch of shares of Company A, then go on TV the next day and say what a great buy it is, then sell it when it goes up the next day.
      - anamax 18y ago
        > He should have a little fun and set aside a million bucks to try to double each year. It's not like he can't make smaller investments just because he has billions of dollars. The Berkshire Hathaway stockholders might object. It's a dumb objection, but it's probably enough to get past summary judgement.
- alecco 18y ago
  Index funds shouldn't be measured by the benchmark indexes as many companies come and go in the very long run. It's not the same performance if you put X money in year 1234 after Y years, some of that X money went to the toilet and the tracker index picked other stocks. There are examples of even great and old big names falling to ashes right now: Lehman Brothers, AIG, and GM. http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Former_components http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Fo... And you lose a lot of mobility on most index funds, I'm still fighting Fidelity to get my money out of one! Don't make my mistake, Dilbert should stick to cartoons.
davidw 18y ago
That's stock picking though, and the difference between Buffet, you, and I, is that you and I have access to pretty much exactly the same information that millions of other people do, whereas Buffet can get more information by going to meet the people who run the company (or more likely, have them go meet him), and gets to see all kinds of details of the business.

by 13ren 18y ago

eleitl 18y ago

Warren Buffett (assuming his performance is not due to chance) buys things he understands. He also has deep pockets. For normal investors, in ordinary times one should pick up an index fund (roughly one third of your total investments, the rest of them are not stocks) and hold unto them until you retire. The formula can be bend slightly depending how far you are from retirement. Of course these are not ordinary times.

tyn 18y ago
As I have pointed out before, "deep pockets" is actually a disadvantage
- netcan 18y ago
  When they're that deep it is. But enough to buy a controlling stake in mid sized companies, that not. Happy middle's where you want to be.
- 13ren 18y ago
  Yes. Warren Buffett has gone on record saying that if he only had a million dollars to invest (as opposed to umpty billion dollars), he was sure he could double it in a year. His problem is that there just aren't that many multi-billion dollar investments around, and those that are, are well known, and therefore accurately priced. Maybe also, for the same reason, it's hard for a massive company to keep growing (a smaller co has more room to grow). With a million or less, he could assess the small companies that aren't covered by analysts and so on, to find one that was (1) great (2) cheap The lack of money is not the deficit that stops you (and me). Mostly, it's effort, and self-confidence in your own considered opinion when it is contrary to everybody else. To buy when others sell - because you've done the research, and trust your judgment. It's mostly an emotional or moral quality. If your judgment is wrong, you have a lovely learning experience that cannot be obtained in any other way (and Warren Buffett has had that experience).
  - tlrobinson 18y ago
    He should have a little fun and set aside a million bucks to try to double each year. It's not like he can't make smaller investments just because he has billions of dollars. Of course if he announced which stocks he picked at the time he purchases them the price would probably increase. Heisenberg and all that... I often wonder if people like Jim Cramer end up manipulating the market just by talking publicly. And is it illegal? If Cramer says "I just bought such and such stock and think it's a great buy", and the price goes up because of it, and he sells his shares for a profit, is that illegal? He simply stated a fact and his opinion. Where is the line drawn?
    - imgabe 18y ago
      I think the SEC has rules about when people like Jim Cramer are allowed to buy and sell stocks that they talk about publicly. He wouldn't be able to buy a bunch of shares of Company A, then go on TV the next day and say what a great buy it is, then sell it when it goes up the next day.
    - anamax 18y ago
      > He should have a little fun and set aside a million bucks to try to double each year. It's not like he can't make smaller investments just because he has billions of dollars. The Berkshire Hathaway stockholders might object. It's a dumb objection, but it's probably enough to get past summary judgement.
alecco 18y ago
Index funds shouldn't be measured by the benchmark indexes as many companies come and go in the very long run. It's not the same performance if you put X money in year 1234 after Y years, some of that X money went to the toilet and the tracker index picked other stocks. There are examples of even great and old big names falling to ashes right now: Lehman Brothers, AIG, and GM. http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Former_components http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Fo... And you lose a lot of mobility on most index funds, I'm still fighting Fidelity to get my money out of one! Don't make my mistake, Dilbert should stick to cartoons.

davidw 18y ago

That's stock picking though, and the difference between Buffet, you, and I, is that you and I have access to pretty much exactly the same information that millions of other people do, whereas Buffet can get more information by going to meet the people who run the company (or more likely, have them go meet him), and gets to see all kinds of details of the business.