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Surviving the bear:Diversified portfoilio and Buffett wisdom
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u deal with that? Are you invested in companies which you know will grow and pay dividend over the years to its share holders?)
So what does this have to do with the average stock investor?
Buffett’s method is all that is needed to be successful in the share market investment world; however, there is not much likelihood that many can follow Buffett’s method completely while investing in shares.
It doesn’t have to do with starting out with a lot of money. Neither does the average stock investor fail because he can’t do the research (the internet has all the information).
It has to do with the human characteristic of emotion.
Even with all of Buffett’s acumen, if he had not exercised patience, he never would have built Berkshire Hathaway into the company it is today – and that’s the critical difference between him and most share investors.
Let’s apply that to today’s stock market which is in turmoil and looks like heading for a bear phase.
You think that’s bad? Buffett’s company stock has fallen 21 percent year-to-date.
So what did he sell as the stock markets treated equities so badly? Nothing. It would not surprise me if he reports that he has been buying additional stock in some of his favorite listed companies, Coca-Cola being one.
So while Warren holds on and adds to his holdings in an erratic share market, the Warren wannabes are trying to time the bottom or simply throwing up their hands in disgust and walking away. And the hedge fund managers,( their compensation and bonuses depend on this quarter’s performance) aggressive institutional and mutual fund money managers are dumping stocks indiscriminately.
Could it be a sign of giving up, of throwing in the towel? Not necessarily the end of the correction, but perhaps the beginning of the end. From a fundamental view, there is a tremendous amount of cash on corporate balance sheets, huge investor sums parked in money-market funds, and what can only be described as major sources of confidence, the insider buying of their own companies’ stocks.
I am not saying there is no mess in the credit markets, whether subprime mortgages and predicted foreclosure rates, failed auctions for auction-rate securities, or the difficulty of marking-to-market securities held by many financial companies besides the major issues of high inflation and higher crude oil prices and tightening of credit availability.
Is it too late to sell? Is it too early to buy? Or will the brightest among us follow the Buffett philosophy and not care if the stock market remains highly volatile for months – or if trading is halted for five years?
One thing I am sure about is that you can make a long list of negatives – reasons to not invest – but I never met anyone who accumulated wealth that way.
So keep it simple as most great ideas in life are simple. Diversify your portfolio and invest in stocks of companies in different sectors. Keep your basics of share market investing clear. Choose companies which are diversified, well managed , have a healthy cash flow and future growth prospects. How to check all this? Check out the track record of the companies through NSE or BSE websites and see their performance over the years.
Last but not least, learn from the master himself and be patient about your stock investing and you will gain over a period of time.
This is the basic of stock market investing. |
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