Bradley Adams - Invest Like Buffett: Learn the Investment Strategies that Made Warren Buffett Rich

Invest Like Buffett

Learn the Investment Strategies that Made Warren Buffett Rich

By Bradley Adams

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Please note the information contained within this document is for educational and entertainment purposes only. All effort has been executed to present accurate, up-to-date, and reliable, complete information. No warranties of any kind are declared or implied. Readers acknowledge that the author is not engaging in the rendering of legal, financial, medical or professional advice. The content within this book has been derived from various sources. Please consult a licensed professional before attempting any techniques outlined in this book.

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Introduction

F or the past 36 years , the stock prices of Berkshire Hathaway have increased by 27%. Berkshire Hathaway, a multinational conglomerate owned by Warren E. Buffett, has been profitable and consistent.

If you asked Buffet to advise you on how a private investor like you could recreate his effective investment techniques, he would guide you to purchase stocks in Berkshire Hathaway. An extraordinarily smart and savvy businessman, this is a no-brainer. But if you purchase, or plan to purchase, other stocks single-handedly, perhaps through a managed investment trust or one at a time, studying Buffett's strategies is beneficial.

What about doing the most practical thing such as investing all your money in Berkshire Hathaway stock? This is not feasible for two reasons: One, since Buffett is an insurance expert, it is predominantly an insurance holding company. Because of this, the stock is nonexistent in many aspects of the stock industry such as health care and technology. Two, Berkshire has grown to have insurmountable success. This success can be compared to increasing the weight carried by the best horse in a race. Simply put, it might be more effective for you to do it on your own. Why? First, your investments are smaller and flexible. Second, you may perform exceptionally well if you buy more stocks in areas that you understand such as technology, health care, banking, etc. Buffett calls this remaining in your circle of competence. Buffett's friends own the business, The Sequois Fund, which holds 30 percent of its assets in Berkshire.

Although the regular investor can pick up a lesson or two from the expert, it is impossible for anyone to recreate Buffett's previous or future investment strategies. The most evident reason is that Buffett can afford to purchase companies outright, instead of small parts or divisions. Additionally, he performs takeover arbitrage, which happens when there is a mergerhe purchases the shares of one company or sells those of the other. Buffet also invests preference shares, precious metals, and bonds. Berkshire has a few investments in some companies and is also a member of the board of directors in these companies. The hardest thing for anyone to recreate is Buffett's special unit of expert investors across the country who do everything possible to keep him well informed about any company he is intent on purchasing.

Additionally, Buffett assures family-run businesses that they can continue operating the company as though nothing has changed, even after he buys them. This is impossible for an individual to recreate. Buffett is an extremely intelligent man a math genius who has spent a large part of his life fanatically studying businesses and their balance sheets. He has also been mentored by a few of the most dynamic and enterprising investment experts of our generation such as Benjamin Graham.

Lets put it this way, although attempting to copy the Williams sisters or Pete Sampras does not necessarily mean that you will end up at Wimbledon, you might learn a thing or two from any advice they dish out or by studying their daily routine and the various things they do to help them win tennis games.

Buffett has stated several times that it is easy to replicate his method. He buys potential businesses with dependable, shareholder-friendly management, especially when these businesses are in temporary distress and the price is favorable. Then he just waits.

An entire collection of books has been written on Buffett and his investment strategies and a myriad of online forums, websites, and yearly meetings are dedicated to discussing Buffett and his methodology almost cultish in fashion. There is a Buffett "guidebook" filled with quizzes and critical thinking tools to help individuals invest in just like Buffet does. This book is not targeted at the expert investor or the Chartered Financial Advisors (CFA), it is mainly targeted at normal investors who are certain that this resource will improve their investment journey.

Truthfully, most of Buffett's investment techniques are very useful for the regular investor. His advice, which he has given amply, is easy and almost infallible. He only buys what he thinks are dependable stocks of companies that are extremely strong and unbeatable companies that will certainly still be at the top of their industries a decade later. He limits his choices to stocks in sectors in which he is knowledgeable. He searches for all the information available, ranging from CEO personalities and quirks to the companys return on equity. He meticulously reviews his errors and promptly fixes them. Although his loyalty lies with the management and staff of the company he buys, his greatest loyalty is to his investors. For Warren Buffett, being a risk-taker is the most despicable thing one can do.

Furthermore, Buffett strives not to make the same errors made by ordinary investors, such as buying the most attractive stocks at the peak of their fame, selling any stock that drops temporarily, trying to be flexible by purchasing all kinds of stocks in a variety of industries, being tempted by intriguing tales without any actual proof of numbers, and stubbornly clinging to his losses while unwarily making profits off his winnings by selling them.

Simply put, as Buffett has said, his success can mainly be attributed to his investments being reasonable and practical. To paraphrase this: Buffett invests with maximum, or even desperate, effort.

A word of caution: It is unnecessary for a regular investor to emulate every single technique used by Buffet, especially, his predilection for buying just a few stocks a disastrous decision for someone who is not an expert on making multiple investments.