Warren Buffet Wise Investment Strategy
There have eight main investment strategies.
1. Stick With Long Term Value Investing Strategies
Don’t let fear and greed change your investing criteria and values. Avoid being overwhelmed by outside forces that affect your emotions. Never sell into panic.
2. Invest in What You Understand
Buffet only invests in companies he understands and believes have stable or predictable products for the next 10 – 15 years. This is why he has typically avoided technology companies.
3. Invest Like You Are Buying the Entire Company
Treat investing in a stock as though you are buying the entire company. I always take a hard look at enterprise value because this is the total price of a company. In other words, it is the price you would be paying for the company if you could buy the whole company at current prices.
4. Companies with Competitive Advantages
Companies with pricing power, strategic assets, powerful brands, or other competitive advantages have the ability to outperform in good and challenging times. A long term investing strategy requires investing in companies that can weather both good and bad economic times.
5. Find Quality Companies
Buffet believes in quality investing. He would rather pay a fair price for a great company than a low price for a mediocre company.
6. Keep Cash On Hand
Investment opportunities become available through broad market corrections or individual stocks that become bargains. These are not predictable events; so cash on hand is an important concept in value investing.
7. Require a Margin of Safety
Purchasing stocks with a margin of safety below their intrinsic value reduces risk and provides an allowance for unforeseen negative events.
8. Compounding and Patience
Buffet believes in long term value investing because he understands the power of exponential growth. Companies with sustainable profits can pay and grow their dividends. There are few more powerful long term investing strategies than dividend growth compounding.