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Sunday, December 6, 2015

How to Invest Like Warren Buffett and Charlie Munger

As one of the all-time great investors of the world, Warren Buffett is someone we should pay attention to. Isn’t it interesting that Warren Buffett and his business partner Charlie Munger, have not only beat the market average for years but have totally crushed it? And they’ve done it with simple businesses. Not necessarily easy businesses but simple and understandable.

In a question and answer session at the University of Nebraska Warren Buffett talked about the types of businesses he buys. He only buys businesses that are simple enough to understand well, and have some type of mote around their product. For example, it is easy to understand the production and sales of Coke, but it would be incredibly difficult for another cola company to take away the business and branding that Coke has already established. Coke has survived the Great Depression and multiple wars, yet it still sells millions of bottles every single day of the year. We can pretty much predict that Coke will still be selling the same or better all over the world ten years from now.

The way Warren and Charlie approach investing is they are buying great businesses for the long run. Warren said “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for ten years.” – Warren Buffett

If you’re not comfortable owning a stock for many years without being able to watch its price changes and receive social feedback about it, it’s not the right company. Charlie said “The big money is not in the buying and selling … but in the waiting.” Many times the solid companies that don’t have rapid changes in price are fairly priced. You may not get a great deal on it but if it really is a great company, with a mote around it and the future secure you may be in the money.

“Price is what you pay; value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” – Warren Buffett

“A great business at a fair price is superior to a fair business at a great price.” – Charlie Munger Read full article...

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