Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Buffett wrote to his investors and explained that stock pickers ''have to work extremely hard to find just a few attractive investment situations'', and because such opportunities are rare, why just nibble at them?
Buffett was no nibbler; he put 40 per cent of his partnership's assets into Amex because there was ''an extremely high probability that our facts and reasoning are correct, with a very low probability that anything could drastically change the underlying value of the investment''. His attitude paid off - within a year the stock price rose more than 40 per cent and compounded at high rates thereafter.
So-called efficient markets suffer from regular outbreaks of inefficiency. Over the past two years, News Corp, Cochlear, QBE Insurance and Cabcharge have all offered attractive investment opportunities due to temporary factors. Buffett's three simple rules show us how to take advantage of them.
Nathan Bell is the research director at Intelligent Investor, intelligent investor.com.au. This article contains general investment advice only (under AFSL 282288).