Invest like Warren Buffett

How to invest like Warren Buffet? 

Quote- If you have built castles in air, your work need not to be lost, that is where they should be. Now put the foundations under them. -Henry David Thoreau, Walden

                                                               The Bible Of Investing 

Want to start investing? And want to invest like Warren Buffet? OK, today we are gonna to teach you how to invest with the help of the book 'The Intelligent Investor' the Bible of investing written by Benjamin Graham(teacher of Warren Buffet). In this post we will give you the summary of its introduction and commentary on introduction. You will be able to invest only if you will read at last and will read all our posts on this book. Let's start-

In introduction, author has explained about the history of stocks, because according to him of you did not know the history of stocks, you will do the same mistakes again. He has told that how people had invested and are still investing when the market is bullish(rising) and divest when the market is bearish(falling) and had great losses. So you should invest when the market is bearish(falling) and divest when the market is bullish(rising) by doing this you will get good stocks at cheap prices when market is bearish and sell them at high prices when the market is bullish. Then author says that while enthusiasm may be necessary for great accomplishments elsewhere, in Wall Street (a street in New York where people buy stocks) enthusiasm leads to disaster. Author advises that we should do a 50-50 division between bonds and stocks,  but when market is bearish we should do a 25-75 division between bonds and stocks. And opposite to this when market is bullish means 75-25 between bonds and stocks. Then he talks about defensive and enterprising investor. The defensive investor is the investor who avoids to take risks and serious lose of money and he wants to do frequent decisions. On the other hand enterprising investor devote time and effort to the selection of good stocks and over many decades enterprising investor had received more profit then defensive investor because of his extra skill and effort. According to author the art of successful investment lies in the first choice of those industries that are more likely to grow in future and in identifying the most promising industries in those industries. You know that the overall return of air-transport stocks have been negative. This draw two morals for us:

1. If a business grows it is not necessary that the investors of that business will get profit.
2. The experts do not have dependable ways of selecting and concentrating on the most promising industries.   

Buffet says that you should not buy stocks far above their tangible asset value,  because if you will buy stocks at high price you will not get profit. Then he says that if you merely try to bring just a little extra knowledge and cleverness to bear upon your investment program, instead of realizing a little better than normal results, you may well find that you have done worse. So you should not try to bear (make fall) upon your investment program. The he advises that you should buy stocks like your groceries not like you buy your perfume. Like when you buy a new mobile phone you search many times for it like how it's ram, storage, etc, you should buy your stocks also like this.

Note that Graham will not teach you how to beat the market, no one can, he will teach is three powerful lessons:

• How can you minimize the odds of suffering irreversible losses. 
• How can you maximize the chances of achieving sustainable gains. 
• How can you control the self-defeating behaviour that keep most investors from reaching their full potential. 

You know that everyone do mistakes, because if you are even 50 percent correct you will need 6 months to be like Bill Gates. Then he again advises to control enthusiasm because in 1990s technology stocks seemed to be doubling every day, but by 2002, they lost 95 percent of their value of more, that means they have to gain 1900 percent peofit to get back where they are. Once Sir Isaac Newton owned shares in South Sea Company and make a profit of £7000, but just months because of enthusiasm he invested a lot in this company and lost £20000 or more than $3 million in today's value. So this means that you did not need a high IQ to be an intelligent investor. And this shows that you should not invest a lot or all your money in only one company. You should invest in multiple companies because most of the companies will get profit because overall economy of a country usually grows.

To be continued 

Next we will give the summary of its first chapter and commentary on the first chapter. I think we will give the next post tomorrow or the day after tomorrow. 

Thank you