Warren Buffet is arguably the best investor – EVER. He is worth billions and billions of dollars and has made the majority of his money by investing in stocks and buying out businesses. We can learn a lot from Warren Buffet – patience for one, but Warren Buffet has some other advice for beginners who are just getting started investing.
Warren Buffet’s Stock Market Advice For Beginners
Don’t look at the price of the “stock”, Instead look at what the company is valued at and what you think it is worth.
When purchasing stocks, you always need to remember you are buying shares of an actual business. One can get caught-up in stock prices, the up, down, P/E ratios and other market analysis, but at the end of the day, we need to determine if the business is a good one and what the value of the business will be in the future.
Learn About The Business First
Before Warren Buffet even looks at the stock price, he reads annual reports and the earnings reports of the business he is interested in investing. After he has read those reports, he tries to figure out what the business should be worth. At that time he will look at the stock and determine if it is undervalued and worth investing in.
Ignore Sectors, Business Type
Warren buffet also states that he doesn’t really care about the type of business or where it is located. He just cares if something is cheap!
Research, Research, Research
One of Warren Buffets best investments was his stake into PetroChina. When asked how he finds undervalued companies like this he simply stated:
Other guys read playboy, I read the reports…
Focus on the “What”
This ties back into to remembering that you are investing in a business and not purchasing a stock. Warren time and time again reiterates the fact that if it is a great business, it will make money. The timing part about the market is the tricky part – there will always be a reason NOT to buy, however if you believe in the business, it will make money.
Don’t Spend Time Looking Back
You can’t spend your time looking in the fast. There is so much to look forward to, it does not make any sense to look back. You can learn from your mistakes, but you have to stick with the businesses you understand. You really want your decision making to be looking in the mirror. You should be able to say “I’m buying 50 shares of General Motors because _______”
Focus on What is Important and Knowable
You can’t spend time worrying about macro data on items that are not knowable. This means information about future interest rates or policy. You don’t want to pass-up doing something intelligent based on what is not known.