Saturday, 16 May 2015

THE BIG PICTURE. Investing is less about the stock price and more about the value of the business.

The Big Picture

Finding companies you know is only the beginning; the circle of competence is only meant to help you stay within your arena of expertise. 

Once you have generated a list of the companies you understand, the next step should be conducting an analysis of the financials. 

Don’t worry — you don’t have to be a finance whiz to understand the basics of the stock market. 

For example, Berkshire Hathaway’s investment philosophy is surprisingly simpleThe company should have 
1.  consistent earning power, 
2.  good return on equity, 
3.  capable management and 
4.  be sensibly priced. 

Investing is less about the stock price and more about the value of the business — is it a good one?

Successful investing is more about learning over time and slowly expanding your circle of competence. For now, stick with what you know and focus on the long term

Anyone can find success in the stock market; you just have to keep it simple. 

As Buffett has famously said, “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” And you know what? $60 billion says he’s right.

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