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15-08-2011, 06:17 PM
Business Times - 15 Aug 2011
INVEST FAIR 2011
Strategies that work well for Warren Buffett
By MICHELLE TAN
EMOTIONAL discipline, a good understanding of accounting, an insatiable thirst to read and patience are key traits that have made Warren Buffett one of the most successful investors in the world today, said Robert Miles, author and authority on Mr Buffett and Berkshire Hathaway, last weekend.
Sharing his knowledge of Mr Buffett's investment strategies at ShareInvestor's fifth annual Invest Fair 2011, Mr Miles conducted a workshop-styled seminar where he debunked popular perceptions of risk and shared with the audience how emotions can be contagious, especially in affecting one's investment decisions.
Mr Miles highlighted the point that investors usually fall prey to panic selling when the market dips and succumb to 'greed' when sentiments turn bullish, and more often than not if such behaviour persists, the investor would eventually end up in a state of pauperism.
As such, being in control of one's emotions and becoming an 'independent thinker' is of paramount importance.
Once an investor is aware of his emotion, he can 'take advantage of the emotion, and buy when everyone else is selling, and sell when everyone else is buying', said Mr Miles.
Still, he admitted that this investment strategy of Mr Buffett's is 'easy to say, difficult to do'. After all, conformity is a powerful instinct that can sway even the most informed investors into following the 'herd'.
Mr Miles also shared with his audience some of Mr Buffett's founding principles, which were inspired by the book The Intelligent Investor, authored by Mr Buffett's professor himself, Benjamin Graham.
One of the key principles pointed out was, before investing in a stock, one should always look at stocks as 'parts of businesses'.
And once a person is able to do that, he will 'automatically become an investor and not a trader'.
But with a medley of stocks available in various international stock markets, how should one identify which ones to buy?
This is where the importance of understanding the difference between market price, book value and intrinsic value comes in, and perhaps this is also when understanding accounting would be a plus, said Mr Miles, who later added that Mr Buffett would only buy investments below their book value and with a good 'margin of safety'.
The saying 'patience is a virtue' also holds true in the game of investing and Mr Buffett is certainly exemplary in this aspect, holding more than half his portfolio for more than two decades. As Mr Buffett himself says: 'Our favourite holding period is forever.'
The most interesting part of the seminar, however, was probably when Mr Miles spoke about Mr Buffett's perception of risk.
Going against the grain of popular belief, Mr Buffett sees volatility and 'old world' stocks as boons and frowns upon an over-diversified portfolio and excessive trading.
But ultimately the key takeaway driven home by Mr Miles is: 'The best investment you can make, according to Warren Buffett, is on yourself and in your education.'
INVEST FAIR 2011
Strategies that work well for Warren Buffett
By MICHELLE TAN
EMOTIONAL discipline, a good understanding of accounting, an insatiable thirst to read and patience are key traits that have made Warren Buffett one of the most successful investors in the world today, said Robert Miles, author and authority on Mr Buffett and Berkshire Hathaway, last weekend.
Sharing his knowledge of Mr Buffett's investment strategies at ShareInvestor's fifth annual Invest Fair 2011, Mr Miles conducted a workshop-styled seminar where he debunked popular perceptions of risk and shared with the audience how emotions can be contagious, especially in affecting one's investment decisions.
Mr Miles highlighted the point that investors usually fall prey to panic selling when the market dips and succumb to 'greed' when sentiments turn bullish, and more often than not if such behaviour persists, the investor would eventually end up in a state of pauperism.
As such, being in control of one's emotions and becoming an 'independent thinker' is of paramount importance.
Once an investor is aware of his emotion, he can 'take advantage of the emotion, and buy when everyone else is selling, and sell when everyone else is buying', said Mr Miles.
Still, he admitted that this investment strategy of Mr Buffett's is 'easy to say, difficult to do'. After all, conformity is a powerful instinct that can sway even the most informed investors into following the 'herd'.
Mr Miles also shared with his audience some of Mr Buffett's founding principles, which were inspired by the book The Intelligent Investor, authored by Mr Buffett's professor himself, Benjamin Graham.
One of the key principles pointed out was, before investing in a stock, one should always look at stocks as 'parts of businesses'.
And once a person is able to do that, he will 'automatically become an investor and not a trader'.
But with a medley of stocks available in various international stock markets, how should one identify which ones to buy?
This is where the importance of understanding the difference between market price, book value and intrinsic value comes in, and perhaps this is also when understanding accounting would be a plus, said Mr Miles, who later added that Mr Buffett would only buy investments below their book value and with a good 'margin of safety'.
The saying 'patience is a virtue' also holds true in the game of investing and Mr Buffett is certainly exemplary in this aspect, holding more than half his portfolio for more than two decades. As Mr Buffett himself says: 'Our favourite holding period is forever.'
The most interesting part of the seminar, however, was probably when Mr Miles spoke about Mr Buffett's perception of risk.
Going against the grain of popular belief, Mr Buffett sees volatility and 'old world' stocks as boons and frowns upon an over-diversified portfolio and excessive trading.
But ultimately the key takeaway driven home by Mr Miles is: 'The best investment you can make, according to Warren Buffett, is on yourself and in your education.'
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