When will you learn to invest like Warren Buffett?
Hi, straight to the point.
- 20.5% annualized return on investing.
How is this possible?
It is simple yet overcomplicated by many.
Value investing the way in which this is done, to find value you have to search for cheap, dirty and under appreciated companies. They are easier to find than you think but the process takes time. A bargain issue is a piece of a business which was once hot and has turned cold over months or years due to over appreciation of the asset at a past time frame.
An example:
Would the 30 year old Warren Buffett buy this?
This is what the graph of a bargain issue looks like, a business which was over appreciated due to media and hype in the community. This business was greatly valued earlier on as it’s expectations were unrealistic and people bought into it. The true value is in buying it once the heat has cooled, a bargain issue- a simple process in finding them.
Metro bank is an example of why most news is noise and not news, you should not purchase based on media coverage for the most part as it is simply a way on inflating a stocks price and moving the price away from the companies intrinsic value. You purchase value issues on pure logic and after excess thought on whether you could find a better bargain issue.
This company is Metro bank, a company which is still growing and it is a value purchase. It has an economic moat, banks have their own moat- they are strong companies and can somehow handle times of recession and depression. So a value purchase, a company with an economic moat and a simple and understandable system- it ticks the boxes. Yet you would have to wait 20+ years before this business would give back but it would give back in excess.
Do you have the patience to be a value investor?
You have to be able to hold for 10 years minimum according to Buffett, personally i’d say 20 years to see decent results.
Simple investing is genius investing, it is the simple process of finding companies, sticking to your logic and having the discipline and patience to hold the piece of business. Buy what is selling at a discounted price, what you understand and something which offers a margin of safety proportional to the amount of risk that you are willing to take.
Why does this work and why does no one do it?
The approach is simple, so simple that anyone can do it, yet it is common for the human mind to think it is being tricked by applying such simple and timeless methodology. Investing is a game in which the wise beat the smart and a game where simple is genius, you do not need to be smart to be a god tier investor it is all about your mindset and emotional temperament. Warren Buffett’s been pushing this concept out for so long, yet as Benjamin Graham would say: “Wall street people learn nothing and forget everything.”
For further education on the stock market check out onezypher:
Investment, business and finance simplified:
A must read for any investor, read it 20 times until you have adopted the right mindset and understand how to invest like Warren Buffett:
Thank you for reading and have a solid week.
Regards,
Jagdip
