This is the sequel of how I beat the market.
I’m glad you’re still reading 🙂 So where did we leave off?…
Oh yes, I fired my poorly performing financial advisor and decided to take a shot at stock investing on my own. I was confused and unsure of where to start. So, the first thing I did was find someone who is already successful at stock investing and try to mimic their strategies.
Who other than Warren Buffett would fit that bill? He’s a prime example of someone who has beat the market year in and year out for decades. But how does he do it? He surely doesn’t follow the same rules as your financial advisor and the majority of investors. He has an uncommon approach that actually makes a lot of common sense.
The books and audio books I read and listened to were The Buffettology series by Mary Buffett, The Warren Buffett Way, The Snowball Effect (mostly a biography), and the Intelligent Investor by Benjamin Graham (Buffett’s mentor). The writers of The Buffettology Series and The Warren Buffett Way, have followed Buffett’s lifestyle and career for many years, noting his behavior, views, and strategies through personal interviews and observations.
I also watched several biographies, lectures and interviews featuring Warren Buffett (some of which can be seen on YouTube). If you really want to learn about Buffett’s investing strategies, then I recommend starting with The Warren Buffett Way. All of the books are good and useful, but the Snowball Effect is more of an overall biography which doesn’t focus as much on the details of his investing strategies.
The more I learn about Buffett, the more he fascinates me. He’s one of the richest men in the world with all of this seemingly all-knowing investing wisdom, but he has such a down-to-earth attitude and a common sense approach. He basically says that he buys a stock as if he was buying the real company as a whole. He also asks himself a few simple questions to determine if it’s a quality company.
After he decides if it’s a quality company, he sees if it is currently being sold at a bargain price below it’s actual value. If so, he buys it and he focuses his time and money on buying this stock. Contrary to the misunderstood concept of diversifying, promoted by most advisors, Buffett tends to focus on buying one good company at a time.
Diversifying does have its place, but it is mostly just a cliche term that most advisors and investors like myself didn’t know how to implement appropriately. Do you know what Buffett has to say about diversifying?
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