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The Warren Buffet principles for investing can be incorporated into a normal person’s investment portfolio by simply following the principles adopted by investment mastermind. A normal person can invest like Warren Buffet by adopting the following financial guidelines:
Spend less: A normal person must spend according to his needs and must not indulge in overspending on lavish items. The money that is saved could be invested in stocks in order to earn a return greater than 20% on an annual basis.
Plan or strategize: A person must plan in advance and set goals and aims that he wishes to achieve thorough the investment. An investor must always remember that the decisions must be in his best interests as opposed to the interest of others such as brokers.

Financial Analysis: An investor must perform the financial analysis of several companies before buying stock so that the viability and future profitability of the stock is ascertained beforehand. An investor must only invest in a company that he truly understands.

Do not fear Risk: A normal person can invest just like Warren Buffet if he overcomes his fear of risk or the fear of losing his investment. Losses arise due to lack of information and Warren Buffet states that stocks are a much safer investment than bonds and other investment options.

Long term investment: An investor that is keen on earning returns like Warren Buffet must think of investment that spans over a long period of time. Continuous stock market trading must be avoided as long term investments are the only ones that result in fruitful gains. Furthermore, a potential investor must start saving at an early age in order to get rich by the time he is 65.

Invest in a viable company: An investor must always invest in a quality organization that offers long term prospects and has a high chance of survival. Warren Buffet is known for investing in sound companies such as IBM and generating high returns.

Buying during crash: A normal investor can invest like Warren Buffet simply by purchasing stocks when markets show an all time low prices. This would help in generating capital returns and would also prevent the possibility of a permanent loss. Investor should know the philosophy “How to Invest like Warren Buffett” as per money forum.

Financial ratios: An investor must analyze the financial ratios of the company namely the return on equity and return on capital employed in order to assess the efficiency of the management of the company in using its assets to generate sales. Investment decisions should be based on facts and figures rather than emotions.

Exercise patience: An investor must remain patient even when stock market shows a decline. This is because if Warren Buffett stock basics principles are followed you are likely to invest in quality companies and these companies stocks will surely recover once things get back to normal.
Trading strategy: A losing stock must be sold when the market is high as this is likely to curtail an investor’s loss. Conversely, an investor must buy quality stock when the market is low in order to limit the initial capital expenditure.
 

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Hi, genelawson8

Well written post with some good points.

A question I have though should someone invest based on someone elses method or should they do their own thing ? Although I have no problem with looking through Galileoes telescope of reason & logic

When Buffet Says invest only in what you understand I think he is on to something ? (not understanding that which one is thinking does not produce good results)

I would not even let Buffet pitch hit my thinking on how to invest, although I might look @ his foot steps to consider if perhaps I should take a differnt path. I must follow a path that fits my personality i.e, emotional make up, ability to think, time etc. I will not be like a dependent kid locked in the basement unable to see the fireworks of the universe with my own eyes.

A big mistake is to ask "who am I to think & judge" instead of trusting in your own eyes as to that which is true. With all the modern technology around us that only a few are responsible for designing it is a very easy thing to do.

I think most investors would do better if they take resposibility, have confidence in what they see with their own eyes & do their own thing.
 

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When Buffet Says invest only in what you understand I think he is on to something ?
haha, when buffett was forced to discuss matters wrt the '08 crash, matters that involved co's he owned like MCO, he admitted under oath he had no idea what was going on - so much for knowing what you invest in.

And hey, if all else fails get gov guaranteed deals the average investor couldn't get a piece of (GS, BAC etc) and at the same time get public assistance (TARP) to bail your sorry a-zz out.

How to invest like Buffett?

You can't. Well, I guess you can try, haha, but I'll bet you don't get the same results :smilet-digitalpoint
 

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Anne scheiber-nothing special about her @ all(to use a more realistic example,mere mortals can't be buffet,---or in other worlds--jordan/tiger woods/gretzky ect----fate almost has to call you)anyways i read up on anne-turned 5k(she started investing @ 38)and turned that bad boy acct into 22,000,000.00 when the dust settled(looked like she lived a rather sad life but that is here not there)----go take a read on this ''normal'' women---she kicked some serious ***-all big caps-re-investing dividends(i don't even think she rebalanced-she had some holdings that were extreamly outsized)she was a ''layman''
 

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Buffet started with a paper route when he was 10, added more paper routes until he had 4 of them, sold used golf balls, amassed $10,000 in savings, took a class in investing from Benjamin Graham, started investing in "value stocks" Graham style, started a little investment fund, when he got too big for little stocks like the Natural Scenic Bridge Company moved on to Big Board stocks like GEICO and American Express, got even bigger, started buying whole companies, eventually became a major dealer in reinsurance and financial derivatives, and now has enough clout to make sweetheart deals with the world's biggest banks, and have his bets guaranteed by the federal government.

So, which Buffet do you want to invest like? The one thread that runs through the man's career is that he is a total miser. Nothing means more to him than making a buck. He could have retired quite comfortably 40 years ago, in fact he announced he was retiring in 1970, but it turned out he wasn't happy unless he was working.

There is a lot one can learn from Buffet. One is the value approach, another is that it is more important not to lose money than it is to make money, another is to keep your eye on the bottom line. I have learned a lot from books and articles by and about him, but must admit I couldn't invest the way he does.
 

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Learn what you can and apply it to what you do.

Don't get sucked into thinking you can invest like WB & get similar results as you likely won't be able to arrange the sweetheart deals that his big money to desperate corporations can arrange.


Cheers
 

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Another way that a "normal person" can invest like Buffett is what information you pay attention to. Whereas most money managers are glued to a bloomberg screen, Buffett does not have a computer in his office, preferring to read quarterly and annual financial reports.

For those that say the comparisons are not valid because of the size of Buffett's investments, the access he has to corporate executives, government guarantees etc., don't look at his recent performance, but his historical performance. Buffett cannot generate the returns that he used to because of economies of scale, any investment he is going to make is going to be material to that company and drive up their price. Buffett himself has said that if he were dealing with a portfolio 1% of his current size, he would be able to generate much better returns. A "normal person" cannot make the same kind of investments that Buffett has been making for the last 40 years, but a "normal person" can make investments the same way Buffett did through his partnerships from 1956-1969 when he consolidated them into Berkshire Hathaway. Some of his best % returns were in those years.
 

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...For those that say the comparisons are not valid because of the size of Buffett's investments, the access he has to corporate executives, government guarantees etc., don't look at his recent performance, but his historical performance...
It's not that the comparisons - it's the costs.

Then too - it's also the available time. When Buffett make those great % returns - I'd bet he wasn't working a job digging ditches or similar and poring over those reports after the kids were in bed.


Now your point about being able to invest smaller amounts more easily is true. Then too, the recent changes of online access and discount brokers commissions have opened all sorts of doors (ex. trying making momentum swing trades profitably with small amounts of money at $150 per trade!).


Cheers
 

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Buy BRK, and you're done. BRK is exactly how Buffet invests today.

Trying do duplicate independantly, well that's not likely. The opportunities today aren't like they were before, and we don't have the status and funds to buy out entire companies, but BRK does.

That being said, a surprising amount of BRKs book value is in common stock that you can simply buy.
 

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Unless you're willing to actually read financial statements (both quarterly and annual reports), including all the financial data and associated notes, then you're not going to be able to invest like Buffett.

It takes a tremendous amount of time and can be pretty boring. It's a full time job! I don't think that anyone holding a full time job can afford to do this in their spare time. This was, fundamentally, why "advisors" and "fund managers" exist; they're supposed to be doing this work for you. Unfortunately, very few of them also read or understand financial statements.
 

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I'll add that many people (mistakenly) think it's easy to replicate what Buffett has done (or misunderstand what Berkshire is).

It's NOT just a matter of finding "value stocks" and buying them. This is a grossly oversimplified description of what they do! Berkshire has a large stock portfolio ($87 billion) but they also have another $337 billion of non-stock assets that generate cashflow. In other words, his stock picks are only 1/5th of the BRK story.

So when you look at the long term Berkshire performance, remember that stock picks are a small part of it. Most of Berkshire's performance comes from the wholly owned & controlled cash generators (insurance companies etc.). So going back to the original question, how can a normal person invest like Buffett... well, start by getting your hands on over $1 billion capital so you can buy and control strong businesses.
 
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