Sunday, March 15, 2009

How to think like Warren Buffett

Filed under: investing, Warren Buffett
The Malaysia Star interviews Robert Miles, author of three books about Warren Buffett. Miles has spent 10 years studying Buffett, and offers some tips on how to think like one of the world's greatest investors.

So what's the Buffett strategy? Here are the steps, according to Miles:

Find a stock's value. Don't let the market determine a stock's value for you. Calculate the value of a share on your own, and then figure out the best price to pay for it.

Wait. Be patient, and wait for the market to give you a good price on what you want.

Learn. Study accounting and learn how to value a business. Take time to understand how the market works.

Think like an owner. Look at a stock as a share of a business. You own part of that business. That allows you to think more about the value of the company.

Watch the market mood. The market is either manic or depressed. Sell during a manic market and buy in a depressed market.

Look for safety. The margin of safety is the difference between a stock's value and a stock's actual price. A lower price means more of a margin of safety.

Control your emotions. People want to win, and they push share prices up and down. Be rational, master your emotions and don't confuse price with value.


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