How Warren Buffet invests his money in stocks
There are a number of reports by various publications in the world, which tell a lot about Buffett's strategy to invest in stocks or businesses and how he went from buying his first stock at age 11 to owning multiple companies, becoming third richest person on earth.
Oracle of Omaha, Warren Buffett is one of the world's richest investors and the Chairman of Berkshire Hathaway. He is famous for his stock investments worldwide. People want to follow his footprints on investment street. There are a number of reports by various publications in the world, which tell a lot about Buffett's strategy to invest in stocks or businesses. He went from buying his first stock at age 11 to owning multiple companies placed in Fortune 500 list, making him the third richest person on earth.
Gary Mishuris, Managing Partner, Silver Ring Value Partners wrote on Forbes about his meeting with Buffett, around fifteen years back. Mishuris said he was with Buffett at a group dinner long ago and asked the investor about his key strategies to evaluate a stock. In answer to the same, Buffett replied, first he thinks about the business and decides whether he can roughly estimate its key economic insights for next five to 10 years and if he can’t then he eliminates them from consideration right there.
According to an article published in The Balance, written by Eric Rosenberg, Warren Buffett advises to invest in index funds, if anyone finds it difficult to evaluate a particular business. As index funds provide you some benefits like instant diversification, clear picture of the economy due to blue-chip companies, low trade fee, easier to trade etc.
Buffett believes that when an investor does not understand any business or is unable to evaluate the working model of the same, he/she should never invest in that company or stock. Even if others in the market or street are doing so, one should always listen to his/her own intuition.
According to Sovit Manjani's article on Moneycontrol, Buffett prefers buying stocks at the time of crises. Accumulating some companies at the time of financial or economic crises adds an advantage for an investor to get good businesses at bargained prices. He further said that algorithms and bots are the new age tech that can help in analysing the technical indicators and movements of stocks but cannot guarantee the success of your investment in the long term.
Some businesses are strong enough to buy during their worst phases. For example, housing will continue to remain there, no matter how much this internet thing progresses in future as you cannot stay over the internet. Similarly, banking or financial institutions will continue to remain there in future as companies or businesses will require loans or funds to operate.
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