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Buffett's investment philosophy is original

2011-04-04

ocean181

Code age 12 years

concern

Legendary securities investor Buffett's investment philosophy: 5+12+8+2

Buffett is a legendary securities investor in the world today, with a unique and concise investment philosophy and strategy, he has invested in the stocks and convertible securities of famous companies such as Coca-Cola, Gillette, Salomon Brothers Investment Bank, general electric and other famous companies. Below we introduce Buffett's investment philosophy———

Winner Code: 5+12+8+2

The Ba-style method can be roughly summarized into 5 investment logics, 12 investment points, 8 stock selection criteria and 2 investment methods.

5 investment logics

1． Because I think of myself as the operator of the enterprise, I become a good investor; because I think of myself as an investor, I become a good business operator.

2． A good business is more important than a good price.

3． A lifelong pursuit of consumer monopoly enterprises.

4． What ultimately determines a company's share price is the company's substantial value.

5． There is no time for getting rid of the best businesses.

12 investment points

1． Take advantage of the stupidity of the market and make regular investments.

2． The bid price determines the level of return, even for long-term investments.

3． The compound growth of profits and the avoidance of transaction fees and taxes benefit investors immensely.

4． I don't care how much a company can make in the next year, only how much it can make in the next 5 to 10 years.

5． Invest only in companies with high certainty of future returns.

6． Inflation is the biggest enemy of investors.

7． Value is the same as growth investment philosophy; value is the discounted present value of an investment's future cash flows; and growth is simply a forecasting process used to determine value.

8． An investor's financial success is directly proportional to his knowledge of the companies in which he invests.

9． The "margin of safety" assists your investment in two ways: first, to buffer against possible price risk; second, to obtain a relatively high return on equity.

10． It would be foolish to own a stock and expect it to rise next week.

11． Even if the President of the Fed secretly tells me about monetary policy for the next two years, I will not change any of my actions.

12． Ignore the rise and fall of the stock market, do not worry about changes in the economic situation, do not believe any forecasts, do not accept any inside information, and pay attention to only two points: A. What stocks to buy; B. Buy price.

8 investment criteria

1． It must be a consumer monopoly.

2． The product is simple, easy to understand and promising.

3． Have a stable business history.

4． Operators are rational and loyal, always putting the interests of shareholders first.

5． Financial stability key.

6． High operating efficiency and good returns.

7． Low capital expenditure and ample free cash flow.

8． Reasonably priced.

2 ways to invest

1． Cards are punched, held for life, and checked once a year for the following figures: A. Initial return on equity; Operating Gross Profit;C. Level of liabilities; Capital expenditures; cash flow.

2． Short-term arbitrage can also be considered when the market overestimates the price of a stock held.

In a sense, card punching and lifetime holdings constitute the most unique part of the Ba-style method. It is also the most fascinating part.

The magic weapon for long-term success: stay away from the market

A thorough study of the Ba-style approach reveals that the investment decisions that affect their ultimate success, while indeed related to "information that the market has not yet reflected", are public and available to anyone there.

No insider information and no spending of a lot of money. It's like the academic metaphor: when there are 1,000 monkeys tossing coins, there is always one that always throws the front. But that doesn't explain the fact that buffett alone has a record of 32 consecutive years of victory over the market in an investment competition with thousands of investors.

In fact, Buffett's success depends on a different set of investment philosophies, different investment philosophies and logic, and different investment techniques. Behind the seemingly simple operation method, you can actually understand the profound truth, and it is so simple that anyone can use it. Buffett once said he was puzzled by the irrational behavior of the group of highly educated professionals on Wall Street. Maybe people are in the market, involuntarily. So he ended up leaving New York and hiding in a small town in the Midwest, and he was far from the market, and he beat the market.

　　In its latest issue, U.S. News & World Report magazine introduced the six elements of Buffett-style investing, saying that buffett's mystery lies precisely in his simple and effective way of investing.

　　What are the elements of Buffett's approach to investing? The article lists 6 points for investors' reference:

　　First, make money without losing money

　　This is a quote that Buffett is often quoted: "The first rule of investing is not to lose money; the second is to never forget the first." "Because if you invest a dollar and lose 50 cents, you only have half the money left, unless you have a hundred percent return, you can get back to the starting point."

　　Buffett's greatest achievement was three bear markets between 1965 and 2006, and his Berkshire Hathaway company lost money for only one year (2001).

　　Second, don't be deceived by the proceeds

　　Buffett prefers to use the return on equity to measure the earnings of a company. The return on equity is divided by the company's net income by the shareholders' share capital, which measures the company's profit as a percentage of the shareholder's capital, which can more effectively reflect the company's profit growth.

　　According to his value investing principles, the company's return on equity should be no less than 15%. Among Buffett's publicly traded stocks, Coca-Cola has a return on equity of more than 30 percent and American Express at 37 percent.

　　Third, we must look at the future

　　Buffett is known as the "Prophet of Omaha" because he is always consciously discerning whether the company has a good future and whether it can continue to be successful for the next 25 years. Buffett often says to look forward through the window and not in the rearview mirror.

　　One way to predict a company's future development is to calculate how much the company's expected future cash income will be worth today. This is Buffett's way of assessing the intrinsic value of the company. Then he would look for companies that deviated seriously from that value and sold at a low price.

　　Fourth, insist on investing in companies that can constitute a huge "barrier" to competitors

　　Predicting that there will be risks in the future, Buffett prefers companies that can form a huge "economic barrier" to competitors. This does not necessarily mean that the company in which he invests must have monopolized a product or a certain market. For example, the Coca-Cola Company has never had a shortage of competitors. But Buffett is always looking for companies that have a long-term competitive advantage and make his predictions of the value of the company safer.

　　One reason Buffett was reluctant to invest in tech stocks in the late 1990s was that he couldn't see which company had a long-term competitive advantage.

　　Fifth, if you want to gamble, you will gamble big

　　The vast majority of value investors are conservative by nature. But Buffett is not. The $62 billion he invested in the stock market is concentrated on 45 stocks. His investment strategy is even more aggressive than that number. In his portfolio, the top 10 stocks account for 90% of the total investment. Justin Fuller, senior equity analyst at Morningstar, said: "This is in line with Buffett's investment philosophy. Don't hesitate, why not invest your money in the people you are most interested in? ”

　　Sixth, be patient and wait

　　If you change hands in the stock market, you may miss an opportunity. Buffett's principle is: don't change hands frequently until you have a good investment partner.

　　Buffett often quotes legendary baseball batter Ted Williams: "To be a good batter, you have to have good balls to play." "If there is no good investment partner, then he would rather hold cash." According to Morningstar, cash accounts for more than 18 percent of Berkshire Hathaway's investment allocation, while most fund companies have only 4 percent cash.

　　"Our focus is to try to find companies that are predictable in the next 10, or 15, or 20 years, which are normally going to be in the next 10 years, or 15 years, or 20 years," Buffett said. This is the so-called Buffett ability principle, Buffett is far from those investment varieties that he cannot grasp. Buffett is still like this, can we ordinary investors say that seeing new energy and seeing new technologies can predict the future development trend of the industry?

　　The domestic market has come to today's point, and many people feel that the heights are cold and frightened. How many people are hesitating to "buy or sell". These are all based on thinking about systemic risk in the market. Because our market has only been running for more than a decade, if we look at the history of the US market for decades, we will find that the stock market is constantly breaking upwards cyclically, and new highs are constantly being innovated, so if you invest in indices for a long time you will not be set. But for a specific listed company, it may disappear in this market after a few years; in China, many companies have a shorter survival period, so the company's individual risk is actually the largest.

　　Buffett invests in companies that operate almost exactly the same way today as they did 5 or even 10 years ago. According to statistics, from 1990 to 2000, only 25 of the Fortune Global 500 were able to meet the double standard of excellent performance: the average return on shareholders' equity reached 20% for 10 consecutive years, and no year was less than 15%. These superstar companies are also superstars on the stock market. The competitive advantage that these companies were able to achieve sustained profitable growth 10 years ago can certainly be believed to be able to improve their growth capacity even more in the future. Buffett said that what I like is the kind of industry that can make a lot of money without how to manage it, and they are the kind of industry I want to invest in. Government Employees Insurance Company and The Washington Post are such industries, while Coca-Cola and Gillette Blade are companies that Buffett has long observed as a company that has continued to compete for a long time.

　　Buffett's evaluation of the investment of network companies in 1998 was that he was not an expert in network stocks, when he thought that he could not see the development prospects of this industry, and after the baptism of the network bubble, Buffett slowly recognized the advent of the new economic era, and agreed that the emerging industries produced by the new economic era began to enter the harvest period, which was already worth investing, so it was not familiar with it and also needed dynamic consideration and observation. When everyone can't do without computers in their work, the computer industry is also a traditional industry.

　　Stock indexes have come to this point can not determine where the highest point is, but investors should leave the stock index troubles to study their own ability to study the company, because good companies will eventually go to higher prices even if systemic risks come, and if the wrong company is selected, it may be lost in a few years.

　　We can find that Buffett's heavy position locks in the concentrated stocks are concentrated in finance, consumer goods, media and other familiar areas of daily life, while Coca-Cola, The Washington Post, Geely Blade, and Wells Fargo are all products seen every day. These experiences are worth learning from value investors.

　　Buffett first encountered a big bull market, and his decision was to exit the stock market.

　　In 1968, U.S. stocks were trading like crazy, with an average daily turnover of 13 million shares, 30 percent more than the record highest in 1967. For the first time in its history, the stock exchange was overwhelmed by the sheer volume of buying and selling documents. And so on for many days. In December 1968, the Dow Jones index climbed to 990 points, and in 1969 it rose above 1,000 points.

　　In May 1969, Buffett, fearing that he was in mourning his misery and that his profits would be in vain, finally made up his mind and made an extraordinary decision to dissolve his private equity fund. When the market was at the height of a bull market, he announced his exit: "I can't adapt to this market environment, and I don't want to try to play a game that I don't understand and damage my decent performance." ”

　　Buffett's decision proved to be incredibly wise. By May 1970, the average stock on the stock exchange was down 50 percent from the beginning of 1969.

　　Buffett's second big bull market was his choice to sell most of his stocks.

　　In 1972, the U.S. stock market was again a big bull market, and the stock price rose sharply. At the time, almost all investment funds were concentrated on a group of large, well-known growth stocks, such as Xerox, Kodak, Polaroid, Avon and Texas Instruments, which were called "beautiful 50 shares" and the average price-earnings ratio rose to an astronomical 80 times.

　　Because the stock price is too high, Buffett can't buy a stock with a reasonable stock price, and he is very distressed. In 1972, when Berkshire's portfolio of securities was more than $100 million, Buffett threw out a large number of stocks, leaving only 16% of the funds to invest in stocks and 84% of the funds to invest in bonds.

　　In 1973, the share price of the "Pretty 50 Shares" fell sharply, the Dow Jones index continued to fall, and the market was shaky. The companies that went public in 1969 watched their stock market value fall in half.

　　In early October 1974, the Dow Jones index plummeted from 1,000 to 580 points, and almost every stock in the United States had a single-digit price-to-earnings ratio, which is very rare on Wall Street, no one wants to continue to hold stocks, everyone is selling stocks.

　　In the pessimistic voice of the market, Buffett cheered loudly. In an interview with Forbes, he said: I feel like i'm like a very lad coming to my daughter's country. The time has come to invest. ”

　　The last time Buffett encountered a big bull market was in 1999, the S&P 500 index rose by 21%, while Buffett lost 20%, not only lost to the market, but also lost very badly, a difference of 41%, which is Buffett's worst performance in more than 40 years.

　　From 1995 to 1999, the U.S. stock market rose nearly 150 percent, an unprecedented bull market. The most important driver is the surge in cyber and high-tech stocks. Buffett, on the other hand, refused to invest in high-tech stocks and continued to firmly hold shares in traditional industries such as Coca-Cola, American Express, and Gillette, losing to the market at the peak of the bull market in 1999.

　　But Buffett was unmoved: "In 1999 our stock portfolio changed almost nothing. We have had a disappointing track record during the year, but we believe that these companies have a strong competitive advantage that will be sustained over the long term, and that this trait is a guarantee of good investment performance over the long term. Occasionally, Munger and I believe we can tell if a company has a long-term and sustained competitive advantage. But in most cases, we simply can't, at least not 100 percent, conclusively. That's why we never invest in stocks in high-tech companies. Although we also agree that the products and services provided by high-tech companies will change society as a whole. But one of the problems we simply can't solve in investing is that we don't have the ability to tell which companies in the high-tech industry have a truly sustainable competitive advantage in the long term. ”

　　At the 1999 annual meeting, shareholders blamed Buffett, and almost all newspapers and media said that Buffett's investment strategy was outdated, but Buffett remained unmoved.

　　In fact, Buffett clearly expressed his views on the big bull market as early as Berkshire's 1986 annual report: "What is more exciting than participating in a bull market in which the returns to the company's shareholders become completely out of touch with the slow growth of the company itself." Unfortunately, however, it is absolutely impossible for the stock price to exceed the value of the company itself indefinitely. In fact, due to the frequent buying and selling of stock holders and the investment management costs they bear, their overall return on investment must be lower than the performance of the listed companies they own for a long time. If U.S. companies overall achieve an annual return on net assets of about 12 percent, investors will end up with a much lower return. Bull markets can dull the laws of mathematics, but they cannot abolish them. ”

　　It turns out that Buffett, the god of stocks, is right. In 2000, 2001 and 2003, the US stock market fell by 9.1%, 11.9%, and 22.1%, with a cumulative decline of more than half, while Buffett's performance rose by more than 30% in the same period.

　　One has to admire Buffett's long-term vision and admit that value investing strategies can beat the market in the long run.

　　Because the big bull market can't last forever, excessively high stock prices will eventually return to value.

　　To know how to properly deal with the big bull market, keep in mind Buffett's distinctive investment credo: "Fear when others are greedy, greed when others are afraid." ”

　　-Although the organizational form is a corporate system, we regard shareholders as partners.

　　Charlie Munger and I (Vice Chairman of Berkshire Hathaway) see our shareholders as owners and partners, and we ourselves as managing partners. We believe that the company itself is not the ultimate owner of the assets, it is merely a conduit that connects the shareholders to the company's assets, and the shareholders are the true owners of the company's assets.

　　-In line with the principle of owner orientation, we are self-reliant.

　　Most company directors invest the majority of their personal net worth in the company. Charlie and I cannot guarantee the results of our operations, but we guarantee that if you become our partner, no matter how long it takes, our wealth will change in sync with yours. We have no intention of taking advantage of you with high salaries or stock options.

　　-Our long-term economic goal: to maximize the average annual growth in intrinsic business value per share.

　　We do not judge Berkshire's economic significance or performance on its scale. Our measure is the growth value per share.

　　-In order to achieve its goals, the Company's first choice is to hold a diversified portfolio of assets.

　　Our first choice is to hold a diversified portfolio of assets that generate stable cash flow and consistently deliver above-market average returns on assets.

　　-We report the returns of each major investment, as well as important data.

　　Due to our dual objectives and the limitations of traditional accounting methods, traditional accounting methods have become difficult to reflect real operating results. As owners and managers, Charlie and I were virtually blind to this data. However, we will report to you the return on each major investment we control, as well as those data that we deem important.

　　-The book results do not affect our operational and capital allocation decisions.

　　When the cost of the merger of the target assets is similar, we prefer to buy assets that are not reflected on the books but can generate a $2 gain rather than an asset that can be reflected on the books and has a yield of $1.

　　- We rarely borrow.

　　When we do borrow, we try to fix long-term interest rates. Instead of over-borrowing, it is better to pass up some opportunities. Charlie and I would never sacrifice even a night's sleep for an extra return of one or two percentage points.

　　-We will not let shareholders pay to satisfy management's desires.

　　We don't ignore the long-term laws of the economy and buy entire companies at artificially manipulated prices. When spending your money, we spend it as carefully as we do our own and weigh the value you can get if you diversify your own investments directly through the stock market.

　　No matter how noble the intention, we believe that only the result is the test.

　　We are constantly reflecting on whether the company's retained earnings are reasonable, and the test is that for every $1 in retained earnings, at least $1 in market value is created for shareholders. So far, we have basically done just that.

　　- We issue common shares only when the harvest and the pay are equal.

　　This rule applies to all forms of offerings – not just mergers and acquisitions or public offerings, but also debt-for-equity swaps, stock options, convertible securities, etc. Every share represents a part of the company, and the company is yours.

　　Regardless of the price, we have no intention of selling the quality assets that Berkshire owns.

　　You should be well aware that this is a mindset that I and Charlie share and can hurt our financial performance. Even those businesses that we think are less than satisfactory, as long as cash flow is expected and we are satisfied with their management and labor relations, we will hesitate to decide whether to sell.

　　-We will report results to you frankly, highlighting events that have both positive and negative effects on the valuation.

　　Our principle is to report to you the truth that we ourselves want to know, with a mindset of empathy. It is our obligation, and we will never compromise it.

　　- We will only discuss the buying and selling of securities to the extent permitted by law.

　　While our strategy is public, good investment ideas are scarce and expensive, and have the potential to be acquired by competitors. Similarly, for good products and corporate merger and acquisition planning, we must also pay attention to confidentiality. So we generally don't talk about our own investment ideas.

　　We want Berkshire's stock price to be reasonable and not overvalued.

　　To the extent possible, we expect each of Berkshire's shareholders to receive gains or losses during the period in which they hold shares in proportion to the increase or decrease in the intrinsic value of the company per share. Therefore, Berkshire's stock price and intrinsic value need to be kept constant, hopefully 1:1.

　　The books on Buffett are abundant, usually from the perspective of stock investment. However, there are exceptions, such as investment manager James O'Rocking's "Warren Buffett Biography", which shows Buffett from a unique perspective as a capital manager and a popular leader. Especially in the process of revealing Buffett's model, the study of the scope of coercive power and ability is thought-provoking.

　　Surprisingly, Aloelin said the so-called Buffett model was supposed to be a failed model. The question we have to ask is, "How did he transform such a pattern that should have failed into a successful one?" ”

　　The laws of physics suggest that the bumblebee simply cannot fly because its wing surface area is too small and the fan speed is too fast to generate a large enough thrust to produce the required lift. Berkshire, too, should underperform in the long term, because experience shows that the insurance industry is only theoretically attractive, highly diversified companies are extremely inefficient, it is crazy to cobble together a whole bunch of companies with nothing in common with mergers and acquisitions, it is dangerous to reinvest all of the company's cash, it is dangerous to let managers go their own way, and holding cash and other low-rate-of-return assets when the company's target returns are high is just a fixed load. But like bumblebees, Berkshire not only flew, but behaved so well.

　　Aloelin convincingly solved the mystery. On the one hand, "the most important thing is that Buffett understands that when the code of conduct that people should follow is developed from the heart rather than from the top down, then people management is sublimated into personal motivation." Buffett found that only by boldly letting go could he achieve managerial control and make his manager act like an owner, thus achieving Lao Tzu-style management — inaction.

　　Buffett, on the other hand, sees himself as part of the capital markets, and his job is to allocate resources so that they can be used most effectively. He wanted to maximize objectivity and minimize it. By implementing the field of capital management into important and knowable aspects, forming its own "scope of ability", it has acquired objectivity, greatly improved certainty and decision-making success rate, and formed a set of effective capital allocation models.

　　Coercive force

　　Buffett's first encounter with coercive forces was the acquisition of Dempster Mills Manufacturing in 1961, and he found it not easy to bridge the gap between ownership and management, to combine his own interests and those of his managers, and two years later he chose to leave — selling his shares. Buffett made the biggest mistake of his life at this time - the acquisition of another "cigar butt" company, Berkshire, because the preconceived conclusion of the commitment to the textile industry led him to fall into the trap of doing business for 20 years.

　　Later, under the influence of Charlie Munger's mindset, "by analyzing his own mistakes and associating them with the challenges of running Berkshire Hathaway," Buffett's perception took a leap forward: unavoidable coercive forces were ubiquitous in institutions; rationality tended to back off when it worked; strategic planning was the root of coercive forces, so managers were deprived or lost their insight as money transferrs. Buffett illustrates the role of coercive power by using the following examples: (1) a system, as described by Newton's First Law, will always resist any change in its current direction; (2) just as work can be filled with available time, the company's planning and income will be embodied in absorbing additional funds; (3) any leader who aspires to succeed in business, no matter how stupid, will soon be supported by detailed studies of the rate of return and business strategy made by his subordinates; (4) Competitors' behavior will be foolishly imitated.

　　After thoroughly understanding the coercive forces, Buffett worked hard to transform Berkshire into a company where the coercive forces had no place to stand, by refusing to use strategic planning as a means of leadership, ensuring that the use of the capital profit rate goal to dominate their actions and motivate and restrain those employees in important positions, that is, to take the "allocation of funds" approach to resist and dissolve the coercive forces; and at the same time to establish a corporate culture of "acting like the owner" to achieve leadership, give managers full freedom, so that they form an intrinsic motivation. And bring Buffett the greatest obedience and reward.

　　Range of capabilities

　　Buffett's investment success-to-failure ratio is 99:1. Behind such a high success rate, the concept of "range of capabilities" plays a crucial role. Buffett's so-called "range of ability" refers to "important and knowable things", which Buffett figuratively likens to baseball's "batting area".

　　Buffett's range of abilities gives him a sense of control that humans crave when faced with uncertainty. A sense of control can produce a sense of security, and Buffett's shareholders are also his partners, coupled with the protection of the margin of safety, Berkshire basically has no debt, all the conceivable consequences are benign, which provides a second guarantee of security, promotes Buffett to maintain emotional balance in the "batting area", can objectively evaluate the opportunities offered to him, eliminate uncertainty, greatly improve the hit rate of the bat, making him above average in capital management and prosperous.

　　Aloelin argues that Buffett developed a "three-step" mental model based on the scope of his abilities: first, to determine what he knows, by identifying the truth, the motives behind the truth, and their interconnections; second, by making sure he knows something, by thinking backwards to prove that his previous conclusions were wrong; and third, examining what he knew and picking out feedback from the consequences of the decisions he had made.

　　The second step is usually overlooked, and this step is very important to ensure the objectivity and correctness of the understanding. Niu Gensheng once said that his adoptive mother had a great influence on her education: "You know, upside down; upside down, know everything." Isn't "upside down" a process of reverse thinking and empathy?

　　A good friend of Auloklin's read the manuscript of the book and exclaimed, "Oh my God, Buffett knows everything!" ”

　　Buffett has such a successful model, not because he is a genius, but because he has experienced what the author calls an "explosion of understanding", through unremitting learning, tireless thinking and courageous and firm practice.

Rich List: Reveal the rich and prosperous life of Chinese and foreign rich people

　　In today's financial world, Microsoft Chairman Bill Gates and investment tycoon Buffett have long been in the top two of the rankings. They had come together to give a lecture at the University of Washington Business School, and when students asked them to talk about how to get rich, Buffett said, "It's the power of habit." ”

　　Put the eggs in one basket

　　Now that everyone is more and more aware of financial management, many people think that "don't put all your eggs in the same basket", so that even if a certain financial asset is at greater risk, it will not be completely destroyed. But Buffett argues that investors should put all their eggs in the same basket, as Mark Twain suggests, and look at it carefully.

　　On the surface, Buffett seems to have a disagreement with everyone, but in fact, neither side is wrong. Because there is no universal truth about financial know-how. For example, Buffett is an internationally recognized "stock god" and naturally has the confidence to hold a small number of stocks. Due to the limitations of our own energy and knowledge, it is difficult for us ordinary investors to have professional and in-depth research on investment objects, and it is wise to diversify investment at this time. In addition, Buffett's strategy of concentrated investment is based on centralized research and centralized decision-making. With limited time and resources, the success rate of making more decisions is naturally lower than that of those with fewer investment decisions, just as only children are always more cared for and stronger than multi-child families.

　　The business is not familiar and does not do it

　　There is an old Chinese saying: "Business is not familiar and does not do it.". Buffett has a habit of not doing unfamiliar stocks, so he always buys stocks in traditional industries and doesn't touch those high-tech stocks. In the early 2000s, when the network stocks were at their peak, Buffett did not buy them. At that time, everyone agreed that he had fallen behind, but now looking back, the dot-com bubble buried a group of crazy speculators, and Buffett once again showed his steady investment master style as the biggest winner.

　　This example tells us that before making any investment, we must carefully investigate, and do not rush to make decisions before we understand and understand. For example, now everyone thinks that the deposit interest rate is too low, and we should find a way to invest. The stock market is sluggish, and many people want to speculate in stamps, foreign exchange, futures, real estate investment and even investment in "small yellow fish". In fact, the risk of these channels is not necessarily lower than the stock market, and the difficulty of operation is greater than that of the stock market. Therefore, before you are sure, it is safer to put money in savings than to blindly invest.

　　Long-term investment

　　Someone once did statistics that Buffett's investment in each stock is no less than 8 years. Buffett once said: "Short-term stock market forecasts are poison, and it should be placed in the safest place, away from children and investors who behave like children in the stock market." ”

　　What we see is that many people chase the rise and kill the fall, and in the end they only contribute fees to the brokers, but they are empty of bamboo baskets. We may wish to calculate an account, according to Buffett's low limit, a stock held for 8 years, the buy and sell fee is 1.5%. If in these 8 years, once a month to change shares, spend 1.5% of the cost, 12 months a year of expenditure cost of 18%, 8 years is not compounded, static expenses also reached 144%! Not to be unaware, a calculation of a frightened, the devil is often in the details.

　　Buffett recommends books for investors to read

　　Buffett's money-making power makes people who are keen on investment envious, how can you get even a little bit of these divine powers? It may be helpful to take the time to read books that Buffett recommends for investors.

　　Securities Analysis (by Graham). Graham's classic book, a must-read book for professional investors, Buffett believes that every investor should read this book more than 10 times.

　　The Smart Investor (by Graham). Graham wrote exclusively for amateur investors, and Buffett called it "the greatest investment book of all time."

　　How to Choose Growth Stocks (by Fisher). Buffett calls his investment strategy "85 percent Graham and 15 percent Fisher." He said: "Using Fisher's skills, you can understand this line of work... Helps to make a smart investment decision. ”

　　Buffett's Letter to Shareholders: A Joint Stock Company Tutorial. This book collects the best passages from more than 20 years of Buffett's letters to shareholders, and Buffett considers this book to be a first-class job in sorting out his investment philosophy.

　　The Autobiography of Jack Welch (by Jack Welch) is the autobiography of the world's first CEO. It is regarded by managers around the world as the "CEO's Bible". In this book, the management secret is revealed for the first time: how to raise GE from the tenth place in the world to the second place in just 20 years, the market capital increased by more than 30 times to $450 billion, and his growth years, successful experience and business philosophy. Buffett recommended the book this way: "Jack is the tiger woods of management, and all CEOs want to emulate him. They couldn't catch up with him, but if they listened carefully to what he said, they could get closer to him. ”

　　Win (by Jack Welch). Buffett's statement that "with Win, there is no need for other management writings" is an exaggeration, but it also proves the weight of this book. Books such as "Win", including the "Female President Tells You" and "Influence" to be introduced below, are narrated in a way that combines ideas with examples, and if you want to master the skills in a short period of time, then you only need to copy down all the bold titles in the book, because those are the author's summaries of various examples, so a thick book is just around these contents. But if you think that's the essence of the book, then you're wrong, and the real examples in the book and the author's life experience are the selling points of this kind of book. Anyone can master the skills, but the experience is different, and if you are willing to spend time reading every example in the book, I believe you will get more valuable things.

　　Finally, Buffett summed up his day-to-day work this way: "My job is to read." The source of Buffett's divine power should come from reading.

　　Hong Kong's "Letter" monthly magazine recently published an article writing that Buffett has created unprecedented investment results, and his investment performance has increased by an average of 24% per year, maintaining more than 30 years. If you had given him ten thousand dollars in 1956, today the money is more than one hundred and forty million, with all taxes and all the transaction costs of everything.

　　For more than two decades, buffett-led investments have outperformed the S&P 500 for twenty-eight years. Don't think that S&P has not performed well, in fact, the index's past returns have maintained a compound interest rate growth of about 10%, which is better than the performance of many funds; it is already a very satisfactory figure for most investors. But Buffett's performance, five hundred and a half times higher than the S&P, is growing, which is really amazing! It's amazing!

　　Now Buffett's investment empire is listed on the New York Stock Exchange in the form of stocks called Berkshire Hathaway, which is the most expensive stock per share in the world, worth about $75,000 per share. Many people take the possession of Buffett's stock as a symbol of status, take pleasure in going to Omaha every spring to hold a shareholders' meeting, and take the annual report written by Buffett every year as the "Bible" of the investment community. Therefore, Buffett is the most successful investor in the world, and the name of the stock god is well deserved.

　　Compared with many well-known and even Nobel Prize-winning investment theories, such as random walks, the effcient market hypothests and capital assets pricing model, the investment theory of the stock god is much simpler and more practical, and its essence lies in the selection of good and value stocks to buy. Then hold for a long time.

　　First, focus on investment: Buffett's opinion is to focus on a few companies, the reasonable number is ten to fifteen. If the investor's portfolio is too dispersed, it will be self-defeating and self-defeating.

　　Buffett believes in selecting the best companies, focusing on analyzing their economic conditions and management qualities, and then buying companies that have been doing well for a long time and focusing on investing in them. For diversification, the stock god said: "Diversification is a self-protection law for the ignorant, and for those who understand what they are doing, diversification is meaningless." ”

　　Second, choose value stocks, do not know never to do: Buffett's investment performance, in 1999/2000 once lagged behind the market, when the stock god said that he did not understand the science network, did not understand the future development of computer software and did not understand what semiconductors are and refused to buy high-tech stocks. Some people even attacked the gods with this, and the comments of "old dragon clock", "out of touch with the times" and "the scenery is no longer" are applied to Bi's body.

　　As a result, with the bursting of the science and technology network bubble, it once again proved that the stock god was right, which showed that the stock god would only buy the stock of the company that he could understand.

　　Third, overcome the demons of the heart, rational investment: Many studies have pointed out that one of the keys to determining the success or failure of an investor is character.

　　God's experience is to overcome the fear and greed in his heart. After in-depth understanding and research, after finding the true value of buying a stock, ignore its short-term price fluctuations. Because the market is full of too many irrational investors. Staying away from the market (New York) is the choice of the stock god, which is for the sake of "bystander clearance". Buffett's theory is: "Try to be cautious and fearful when others are greedy, and instead move forward when everyone is cautious." "In fact, short-term stock prices are often incomprehensible.

　　Fourth, long-term holding: select the stock of the good company, do not sell it casually because of the small profits of the fly. As long as the company is still performing well and the management is stable, it should continue to hold. "If you have a very bad business, you should sell it right away, because throwing it away you can have a better business in the long run," said The Stock God said. But if you own stock in a good company, don't sell it. ”

　　Fifth, refuse to speculate: The stock god never believes in news and insists on independent thinking. He said that even if Federal Reserve Chairman Alan Greenspan secretly told him in his ear where interest rates would go in the future, it would not change any investment plans.

　　Sixth, waiting for a good opportunity to enter the market: When summarizing his investment experience recently, the stock god pointed out that investors do not need to be frequent in the market. When discovering good stocks, it is necessary to wait for a good time to buy before making a long-term holding strategy, so that the odds of winning are naturally high.

　Over the past year, the U.S. stock market has plunged, and stock market wealth has shrunk by nearly $5 trillion, equivalent to half of U.S. gross domestic product. Although investors have long wanted to cry without tears, Wall Street has a calm and relaxed. Is he the American "stock god" Warren? Buffett.

　　"A bird in the hand is better than a hundred birds in the forest!" Buffett recently re-elaborated on his investment concept in the annual report of his flagship listed company, citing this proverb from the ancient Greek "Aesop's Fables". In his view, gold and silver are the most practical, and betting money on unprofitable network companies is just wishful thinking.

　　Two years ago, Buffett predicted that the technology dot-com bubble would burst. Since the second quarter of last year, the US NASDAQ index, which reflects the trend of technology stocks, has continued to decline, and has now fallen from a high of 5,000 points to the main psychological threshold of 2,000 points and back to the level of December 1998. Many Wall Street investors have plummeted in value, but Buffett has always invested in old economic companies such as insurance and retail, and the listed companies he controls bucked the trend last year, making $3.3 billion!

　　Buffett is the living god of wealth in the eyes of Americans. His flagship public company, Berkshire Hathaway Investments, is unique in the world. For 30 years, the company's capital has averaged 24 percent a year, and its stock is the most expensive on the global stock market. Of course, when technology stocks were in full swing more than a year ago, the company was also in a slump. Stock market investors were almost crazy about technology network stocks at the time, but Buffett was reluctant to take risks, preferring to rub shoulders with these stocks and fall sharply for some Hathaway companies. At the beginning of last year, when various Wall Street stock indexes reached new highs, Hathaway's stock price bottomed out impressively, as the company's earnings per share in 1998 were $2362, falling to only $1025 in 1999, and Hathaway's stock price fell to $40,000, compared with the heyday of June 1998, 8. $40,000, down more than half.

　　At the time, Buffett was quite critical, and even he himself said in his annual report to shareholders about the investment of the past year: "Even the oolong detective Crusoe (the French low-energy detective in the movie) can see at a glance that your chairman has failed... My 'asset allocation' failed, and at most it was only a grade D. ”

　　But Buffett doesn't want to change his investment philosophy. He believes that the high profit level of US companies is difficult to maintain, and the long-term interest rate in the United States is at 5. Around 5%, in this case, whether the return on shareholders' equity can be maintained at 18% to 20% is doubtful. His investment view is not superstitious about Wall Street, does not listen to rumors, actively tracks and buys stocks that are falling in price, known as "smoke butts", and does not consider short-term gains and losses. He only selects companies that dominate a long-standing industry, are technically difficult to steal, and have a proven track record of profitability. As for high-tech companies that don't know what tomorrow will look like today, Buffett has always avoided them as if they were the plague.

　　Buffett is a long-time investor whose hobby is to find reliable stocks, buy them as cheaply as possible, preserve them for as long as possible, and then sit back and watch its value grow day by day. In 1969, the United States was doing well on all fronts, with the economy continuing to grow and the stock market rising. But Buffett doesn't think there will be good results, and one of his dogmas is to keep your distance when the stock market soars. He shrank back and couldn't find the stock he wanted to buy anymore. So he decided to liquidate his company and return the shares that belonged to each shareholder to them. He decided to take a break and wait for the stock market to fall. Sure enough, by the early 1970s, the stock market began to be turbulent, and the stocks of the big Wall Street companies fell rapidly one by one. At this time, Buffett began to attack. He built a new Berkshire? Hathaway, and within a few years, became a major shareholder in Many of America's best-known companies, including Coca-Cola, Gillette, American Express, Disney, and The Washington Post.

　　The situation today is similar to that of the past. The collapse of the internet has driven the entire stock market lower, and perhaps it has given Buffett the opportunity to create another miracle. And his own advice to the shareholders was: "People will always be like Cinderella, knowing that when midnight comes, [the incense carts and waiters] will turn into pumpkins and rats, but they don't want to miss the grand ball." They stayed there for too long. People have now — or should — learn some old lessons: first, that Wall Street sells a mixture of things; and second, that speculation seems easiest and most dangerous. ”

　Bill Gates, who has won the world's richest man many times, admits that he is a "Buffett fan". This Buffett is Warren Buffett, an investor with a reputation as a "stock god", and his wealth is currently ranked second in the world.

　　Although the US stock market has been sluggish in the past six months, and new economy companies have frequently warned, buffett, the stock god, has still added a wonderful stroke to his immortal myth. Buffett's flagship company recently said that due to the profitability of the companies acquired in the past year, the net profit in the second quarter was as high as $773 million, up 21%.

　　As Buffett continues to be bullish on the traditional economy, his subsidiaries have acquired eight companies in a year, including paint companies and jewelry companies. Buffett said its profits mainly come from a number of mergers and acquisitions in the retail, manufacturing, service and other industries.

　　Wealth Story: Loved investing since childhood

　　Buffett was born on August 30, 1930, buffett's father Howard was involved in the securities brokerage business, which made Buffett a little bit of an influence from an early age. The story is well known about when he bought $38 a share of preferred stock in city facilities when he was 11 years old.

　　However, few people know that before that, Buffett had a desire to become a rich man when he was younger. His biography says Buffett declared himself to be very, very rich when he was around the age of 11. At the age of 6, he earned 5 cents from selling Coke. Usually, he would go door to door selling soda drinks for his father.

　　Buffett, 7, had a high fever and was admitted to the hospital. He wrote numbers on paper with a pencil in his hospital bed. He told the nurse that the numbers represented his future possessions. He said: "Although I don't have much money now, one day, I will be rich. My photos will also appear in the newspapers. ”

　　As a child, Buffett loved the book "1,000 Tricks to Make $100." He also followed the book's advice and tried to save money with several friends one by one: going to the racetrack to clear ticket stubs; collecting golf balls for sale, etc. By the time he was 14, Buffett could invest $1,200 in a 40-acre farm in Nebraska.

　　Keep learning investment tips

　　Before Buffett was sure of his investment system, he did technical analysis and listened to inside information like most investors. This is the real Buffett, who was not born knowing that coca-Cola stock should be bought at a price-earnings ratio of 14 times.

　　When Buffett was under 20, he also "speculated" in stocks — he knew that teachers held AT&T stocks (which are typically blue-chip stocks), so he chose the opportunity to sell short. Boys of the same age usually read newspapers and only pay attention to sports editions (young people in China will buy a newspaper such as Football newspaper first), but he looks at the financial edition to study stock charts.

　　After graduating from high school, Buffett was persuaded to study at the University of Pennsylvania's Wharton School, but often spent time on the Philadelphia exchanges to study stock charts and inquire about inside information.

　　If Buffett had continued to study charts and inquire about inside information, he might have gone bankrupt by now, or he would still be a retail investor. But he didn't stop studying, and he applied for admission to Columbia University, where Benjamin Graham taught. In Colombia, Buffett benefited from Graham's Socratic teaching. He began to gradually form his own investment system.

　　In 1957, Fisher, a well-known investment consulting expert, published the book Common Stock and Extraordinary Profits. Buffett personally came to Fisher to ask for advice after reading it, and he thought Fisher's ideas were convincing. It was probably in the late 1950s that he gradually formed his own investment system.

　　Now, decades later, Buffett continues to accumulate and practice his investment ideas and write wonderful investment myths.

　　Buffett's investment legend

　　Buffett's biography, written by Roger Lowenstein, begins with a short essay by Bill Gates, the world's richest man. Gates writes: "His jokes are hilarious, and his diet — a whole bunch of burgers and cokes — is wonderful." In short, I'm a Buffett fan. Gates is indeed a Buffett fan, and he has a firm grasp of Buffett's investment theory: buy stocks at the lowest price and wait patiently. Don't expect to do big business, even medium business can be profitable if the price is low.

　　Remember the stock market crash

　　In the late 1960s, Wall Street was elated, and an unprecedented bull market came. Driven by some large companies, there have been waves of mergers and acquisitions. Big companies like AT&T and Litton are expanding everywhere. Some companies, on the other hand, have deliberately used mergers with low-P/E ratio companies to create the illusion of a significant increase in earnings per share. The investment public is blinded by these illusions and continues to push up stock prices. Although Buffett stated that he would not predict the direction of the market, he constantly reminded himself of the newspaper clippings about the crisis of 1929 on the wall of his office.

　　What could shrink more than a stock market crash? Buffett can't predict the stock market, but he knows he can control himself. In the 1960s, electronics stocks swept Wall Street. Smart investors such as Philip and Fisher Began long-term investments in the 1950s. But people who speculate in stocks don't know it's a good thing until 10 years later. In the short term, the times are heroes, and some fund managers did become popular because they invested in electronic stocks. These fund managers have far outperformed Buffett. But Buffett does not participate in this speculation. "If it's critical for investment decisions that I don't understand a technology that I don't understand, we're not going into the deal," he said. I don't know much about semiconductors and integrated circuits. So more than 30 years ago, Buffett wasn't involved in the speculative wave of electronics; just like today, more than 30 years later, Buffett isn't embroiled in the Internet frenzy.

　　Promote a robust strategy

　　The first and foremost part of Buffett's investment philosophy is: Remember the stock market crash. That is to say, invest with a sound strategy, ensure that your funds are not lost, and always remember this. Second, let your money grow at a moderate rate. Buffett's main investment targets are companies with medium growth potential, and these companies are believed to continue to grow.

　　When investing in the stock market, setting yourself a reasonable long-term average yield is the basis for success. Buffett has done a great job in this area, and he is not asking for himself, as long as he can beat the Dow Jones Industrial Average by five percentage points per year.

　　But even with such a low target, Buffett often works late into the night. "Not only does he work from 9 p.m. to 5 a.m., but when he's awake, the wheels keep spinning." (According to The Growth of an American Capitalist, Hainan Publishing House). Some say Buffett works an average of 13 to 14 hours a day. From this point of view, it is reasonable that he wants to achieve moderate growth.

　　Buffett just went step by step according to his plan. After the 1970s, Buffett's personal wealth gradually moved toward "billions". But if we go back and look at Buffett's previous investment experience, it will be more meaningful.

　　54% annual growth rate

　　Many people think that Buffett only started at $100. In fact, when he founded Buffett Partners, his personal wealth was $140,000 (roughly equivalent to $300,000 or more than $2 million today). Buffett's personal wealth in 1950 was $9,800, a result of his work-study. Among them, there is $1200 earned from selling golf balls. For a 19-year-old young man, it is indeed not a small amount. That is to say, from 1950 to 1956, in about 6 years, Buffett accumulated nearly $130,000.

　　Buffett married Susie at the age of 22 and lived in an apartment with a monthly rent of $65. He invested $8,000 in GEICO corporations ( Government Employees Insurance Company ) , at which point his fortune was about $12,000. GEICO's share value has tripled in less than two years. Thus, by 1953, Buffett's wealth was estimated to be at least $30,000.

　　The 1950s were the prime time for U.S. stocks, with the Dow Jones Industrial Average rising from 200 points in the early 1950s to 679 points at the end of 1959. Many stocks are flipping up like Sun Wukong flipping and fighting. Once, a Philadelphia broker recommended Buffett an insurance stock called "Home Protection Corporation" for $15 a share. Buffett bought some, and after a while, its price per share rose to $370. By 1956, Buffett's personal capital had surged from $9,800 to $140,000. At this time, Buffett decided to set up Buffett's partnership, Buffett Limited, to raise $105,000. Buffett symbolically invested $100. In 1957, Buffett's funding reached $300,000, rising to $500,000 at the end of the year.

　　In 1962, Buffett Partners' capital reached $7.2 million, of which $1 million belonged to Buffett personally. At this time, he merged several partner ventures into a "Buffett Partners Limited", and its minimum investment was expanded to $100,000.

　　In 1964, Buffett's personal wealth reached $4 million, and by this time he was in charge of $22 million.

　　For Buffett Partners, over the 13 years from 1956 to 1969, the portfolio grew at an average rate of 29.5 percent per year. Of that, 6 percent is interest, 75 percent of the remaining interest is partner profit, and only 25 percent is Buffett's compensation. But after all, the annual return rate of partners is still as high as 23.6%. For Buffett, from $9,800 in 1950 to $25 million in 1968, personal investment grew at an annual rate of more than 54 percent. This is the result of his simple life and the successful investment of most of his money in a partner's firm.

　　Buffett invests in "gold" law

　　1, take advantage of the stupidity of the market, make regular investment.

　　2, the purchase price determines the level of return, even for long-term investment.

　　3. The compound growth of profits, transaction costs, and tax avoidance benefit investors endlessly.

　　4, do not care about how much a company can earn in the next year, just care about how much it can earn in the next 5 to 10 years.

　　5. Only invest in enterprises with high certainty of future returns.

　　6, inflation is the biggest enemy of investors.

　　7. The investment philosophy of value type and growth type is the same. Value is the discounted present value of an investment's future cash flows; growth is simply a forecasting process used to determine value.

　　8. The investor's financial success is directly proportional to his understanding of the investing company.

　　9. The "margin of safety" assists your investment from two aspects. The first is to buffer against possible price risk; the second is to obtain a relatively high return on equity.

　　10) It's foolish to have a stock and expect it to rise next week.

　　11 Even if the Fed chairman secretly tells me about monetary policy for the next two years, I will not change any of my investments for it.

　　12, do not pay attention to the rise and fall of the stock market, do not worry about changes in the economic situation, do not believe in any forecasts, do not accept any inside information, only pay attention to two points: A buy what stocks; B buy price.

　　Slammed bankers for blowing bubbles

　　In March, Warren Buffett lashed out at the flippant investors and Wall Street bankers who created the high-tech bubble. Because it has been sticking to avoiding hot high-tech stocks, Buffett's Berkshire Hathaway Investment Company has more than doubled its earnings last year.

　　While reporting to shareholders that Berkshire's earnings rose 114 percent last year to $3 billion, Buffett, 70, blamed greedy Wall Street bankers for the emergence of the tech bubble, accusing them of inflicting huge economic losses on small and midweight investors. Buffett pointed out that in recent years, Wall Street bankers have put tens of billions of dollars into their own pockets and their relatives and friends by touting high-tech companies.

　　Buffett said that the main motivation of Wall Street bankers to create a high-tech bubble is to package some companies that cannot make a profit at all to make huge profits. Buffett once again reaffirmed his investment philosophy for success: invest only in traditional companies with a solid foundation. In addition, he insists on a deep understanding of the investment objectives before investing.

　　At the time, Buffett's Berkshire Company reportedly owned an 11 percent stake in Coca-Cola, a 9 percent stake in Gillette, and an 18 percent stake in The Washington Post. Berkshire realized a whopping $2.4 billion in investment income last year. In 1999, when high-tech stocks were the hottest, the company's investment income was only $886 million. In the previous 12 months, Berkshire's stock price was up 74 percent. The Nasdaq Composite Index, which is dominated by high-tech stocks, fell 59% over the same period.

For decades Buffett had a set of investment theories that kept him ahead of the stock market and kept him away from high-tech stocks. First, he only engages in long-term investment, not just concepts, models, not just stocks themselves, but real businesses, investing in companies that generate predictable returns. Second, he hates stocks with many stock options, like tech stocks, calling them lottery tickets. Third, he believes that buying the brands around him is the most reliable. Whoever does more advertising, consumers like it, buy whomever they want. Buffett's vision is as always.

　　Buffett's investment success strategy is manifold, of which the "concentrated investment" method is the most effective. Many investors believe that it is insurance not to put eggs in one basket, so instead of pooling funds, they are sending limited funds around. As a result, the funds in the hand were dismembered by the chaotic stocks, resulting in the stock in the hand either this stock rising, or that stock falling, busy all year round, good can make some money, in the middle of the draw, bad case is negative growth... Some people are not good at summarizing year after year, and always think that they are unlucky, but in fact, this is a big taboo for investors.

　　People who have successfully operated in The Chinese and foreign stock markets have a common feature: they are better at careful stock selection and concentrated investment, and there are few people who can bring brilliant returns with diversified investment. This is extremely important for small and medium-sized investors. Buffett summed up the essence of "concentrated investment" briefly as follows: "Choose a few stocks that can produce higher than average returns in a long-term tug-of-war, concentrate most of your capital on these stocks, regardless of the short-term decline of the stock market, stick to the stock market, and win steadily." To that end, much of Buffett's energy is spent analyzing the financial situation of the business and assessing its management rather than tracking stock prices. Buffett admonished investment "laymen": focus. The four principles he personally adheres to in investing are:

　　1． Corporate Principles - Is this enterprise simple and easy to understand? Does the company have a history of perseverance? Does this business have good long-term prospects?

　　2． Management Principles -- Is management rational and is management honest with its shareholders? Can management reject the institutional practice of following suit?

　　3． Financial principle -- focus on return on equity rather than earnings per share. Companies that calculate "shareholders' equity" and seek high profits must ensure that every $1 retained by the company is to create a market capitalization of $1.

　　4． Market Principle -- What is the valuation of an enterprise? Will businesses be heavily discounted to buy at a lower value? A large part of Buffett's "less is more" investment strategy is influenced by the British economist John F. Kennedy. Inspired by Keynes. In a 1934 letter to his business peers, Keynes wrote: "The idea of reducing investment risk by casting a wide net to capture more companies is wrong, because you know very little about these companies and have little confidence in them... People's knowledge and experience are limited, and in a certain period of time, I am confident that there are only two or three companies to invest in. "As an investor, you should at least have an understanding of the business before buying a stock, even if the company has been ST. Of course, Buffett will not invest in ST, because only in our Chinese stock market can ST's stock create miracles. But if you can learn some of the necessary investment methods from Buffett and graft it onto the stock market with Chinese characteristics, even if you buy some so-called "asset restructuring" stocks that are contrary to Buffett's ideas, you will say no

　　The return for a given year is much greater than Buffett's; if you insist on holding the old ba's high-performing stock concept for a long time, it is not impossible, but you must be patient.

　　Buffett's eldest son's eyes were shining, "My dad is the 'second smartest guy' I know, who is No.1?" Charlie Munger. ”

　　Buffett's golden duo of Munger set the best investment record ever" Charlie pushed me in another direction, it was the power of his thoughts, he expanded my horizons. ”

　　Buffett said this about his partner

　　For more than 40 years, Warren Buffett and his Berkshire Hathaway (BRK). A) The company is too dazzling, even the most intelligent and arrogant financial geniuses can read the words and deeds of Buffett, the "god of stocks", with reverence. The shimmering halo behind Buffett almost obscured everyone around him.

Warren Buffett and Charlie Munger

　　But Buffett's eldest son's eyes were shining, "My dad is the 'second smartest guy' I know, who is No.1?" Charlie Munger. ”

　　Charles T. Munger must have been pleased to hear this, and the scenes of 45 years of acquaintance with Buffett will surely come to mind. As Buffett's partner and close friend, he serves as vice chairman of berkshire Hathaway's board of directors — the guy who sat on the podium of Berkshire's shareholders' meeting with Buffett and read out the "Letter to Shareholders." Unlike Buffett, he suffers from "media shyness," so few people really know him. Buffett has a lot of trust in Munger: "As soon as anything happens to me, Charlie Munger will immediately take charge of the Berkshire company." ”

　　Combine with Buffett's double sword

　　Buffett's gold duo of Munger set the best investment record ever. Over the past 40 years, Berkshire stock has grown at an average annual rate of 24 percent, and is now nearly $130 billion in market capitalization, owning and operating more than 65 businesses.

　　In an unprecedented interview with an American media outlet late last year, Munger still attributes all this first and foremost to Buffett: "In the past 50 years of investment and long-distance running, he has always shown superhuman intelligence and youthful and growing vitality. ”

　　But why isn't this the case with Munger himself? After graduating with honors from Harvard Law School in 1948, he went straight to the California court as a lawyer and began investing in securities and joint friends and clients in business activities, some of which had been incorporated into graduate programs at the College of Business.

　　After a successful buyout, Munger gradually realized the huge profit margin of acquiring high-quality companies, "The difference between a well-qualified company and a surviving company is that the former makes decisions easily one after another, while the latter always encounters painful choices." ”

　　Munger has since ventured into real estate investments and earned his first million dollars in a project called the Autonomous Communities Project. Interestingly, Berkshire doesn't invest in real estate.

　　Buffett said of Charlie: "As he became more and more experienced in business, he found small but practical ways to avoid risk. ”

　　Munger has used his experience and skills in other fields to make a name for himself in real estate development and construction. At this time, Buffett was raising his own Buffett partnership fund. Unlike Munger, who has already established close relationships with some partners, Buffett has previously been exclusive. Buffett was only 29 when he met Munger, and Munger was 34.

　　The two see each other and feel sorry for each other. "Charlie pushed me in a different direction, rather than just recommending buying bargains, as Graham did. I evolved from orangutan to human at an extraordinary rate, otherwise I would have been much poorer than I am now. Buffett confessed.

　　Munger also acknowledges their shared value orientation. "We all hate that kind of unthinking commitment, and we need time to sit down and think hard and read about it, unlike most people in the industry." We love this 'weirdness' and in fact it pays off handsomely. ”

　　They often exchange phone calls all night to analyze and discuss investment opportunities, "Munger brings the perspective of business law to the financial field of investment, he understands the internal laws, can analyze and evaluate any transaction more quickly and accurately than ordinary people, and is a perfect collaborator." One partner lamented, "Charlie and Warren are more like you think, Warren's strength is to say 'no', but Charlie did better than he did, and Warren used him as the last secret weapon." ”

　　The duo directed a series of classic investment cases, buying Union Cotton Store, National Bank of Illinois, Akane's Confectionery Company, Vicos Financial Corporation, Buffalo News Evening News, investing in the Washington Post, and founding the New American Fund. Munger then became Chairman of Le Cordon Bleu Printing and in 1978 formally served as Vice Chairman of the Board of Directors of Berkshire Hathaway.

　　"Good character is more important than the brain"

　　Munger often thinks outside the investment theory system, and his thinking is different, allowing him to often draw some interesting conclusions.

　　"Remember that brokers who try to advocate what you do are paid commissions and honorariums by others, and those investors who are new to this industry and don't know anything should start with index funds first, because they are managed by public institutions after all, and there are fewer personal factors." An investor should have a grasp of Graham's basic investment methods and a deep understanding of business operations, and you should establish the idea that quantifying any value and comparing the advantages and disadvantages of different value carriers requires a very complex knowledge structure. ”

　　Munger generally agrees that "markets are efficient," and "that's why being a smart investor is especially difficult." But I don't think the market is fully effective, so this 'somewhatefficient' can bring huge profit margins, and the staggering investment record is difficult to achieve, but it is by no means impossible, and it is not the top of the pyramid that can do it, and I think the top 30% to 40% of the people in the investment management world have this potential. Academics celebrate a diverse investment philosophy, which is a disservice to good investors. Berkshire-style investors rarely try to diversify. The academic view will only make you feel a little better about your investment history and average. ”

　　Munger argues that the importance of being a rational investor is self-evident a lot of the time when others lose their minds, "We're not going to just leave $45 billion there, but you have to be able to judge that crazy moment when high-tech stocks are jumping out of the sky and control yourself away." You won't make any money, but you may be spared. ”

　　"For passive investors, different cultures have different affinities for them. Some are trustworthy, such as the U.S. market, while others are fraught with uncertainty risks. It's hard to quantify this affinity trait and the reason for the credibility, so many people delude themselves. This is dangerous, and it is the most important research topic for emerging markets. "Munger argues that there is no such complex issue as the direction of the exchange rate between the dollar and the euro from a large pile of official economic data," the economist HerbStein once said, and if something doesn't last forever, then it will eventually stop. ”

　　Munger believes that a deep understanding of how to be a great investor helps to be a better business operator, "and vice versa." Warren doesn't take much time to run the industry, and I bet half of our business Buffett has never been involved, but the performance of this easy management approach is there for all to see. Buffett is a good manager who never gets involved in micromanagement. He also shared his own investment experience: "Many people with high IQ are bad investors because of their character flaws. I think that good character is more important than the brain, you have to strictly control irrational emotions, you need to be calm, self-disciplined, indifferent to loss and misfortune, and you can't be carried away by ecstasy. ”

　　Hearing this, Charles T. Munger must be very pleased, and the scene of 45 years of acquaintance with Buffett will surely come to mind. As Buffett's partner and close friend, he serves as vice chairman of berkshire Hathaway's board of directors — the guy who sat on the podium of Berkshire's shareholders' meeting with Buffett and read out the "Letter to Shareholders." Unlike Buffett, he suffers from "media shyness," so few people really know him. Buffett has a lot of trust in Munger: "As soon as anything happens to me, Charlie Munger will immediately take charge of the Berkshire company."

Peter Lynch's Investment Strategy: Finding 10x Stocks It is absolutely impossible to find a formula that works universally for all types of stocks

—Peter Lynch

According to the 6 basic steps of investment operation: selecting the target enterprise, assessing the intrinsic value, analyzing the market price, determining the buyer price, allocating the investment ratio, and determining the holding period, after collecting and sorting out Lynch's discussion on the investment strategy, we summarize the investment strategy into 6 basic principles one by one.

Lynch's stock selection principle: categorize and differentiate

Lynch's approach to analyzing a company's business is primarily to divide it into six types of company stocks based on the growth rate of the company's sales or production: slow-growing, stalwart's, fast-growing, cyclical, asset plays, and transformational dilemma.

Lynch argues that the "growth" of all economic entities means it produces more this year than last year. There are many ways to measure a company's growth rate: sales growth, sales revenue growth, profit growth, etc.

Steady, slow-growing companies are growing very slowly, roughly equal to the growth rate of a country's GNP.

Fast-growing companies are growing very fast, sometimes by 20 to 30 percent a year, or even more. In fast-growing companies you can find the stocks with the fastest price increases.

It's important to note that a company's growth rate can't stay the same forever. — Companies don't always belong to a certain type of thing.

At different times, at different stages of the company's development, the growth rate of the company is constantly changing, and the company often changes from the original type to another type later.

When analyzing stocks, Lynch always first determines the different types of shares of the company, then determines different investment expectations accordingly, and then further analyzes the specific situation of the company and adopts different investment strategies. Therefore, Lynch believes that "classifying stocks is the first step in conducting stock investment analysis." ”

We can only first analyze and determine the type of company's stock, and adopt different investment strategies for different types. Those cookie-cutter clichéd investment principles are often very silly. For example, selling a stock when your investment doubles, selling a stock after two years, selling your stock when the price drops 10% can reduce losses, and so on. You should never believe that these are one-size-fits-all investment principles.

Remember Lynch's advice:

"It is absolutely impossible to find a formula that is universally applicable to all types of stocks."

"Whether the stock market falls by 50 points or 108 points one day, eventually the stocks of good companies will rise, while the stocks of ordinary companies will fall, and investors who invest in these two different types of companies will also get different returns on their investments."

Regarding stock picking, Lynch has repeatedly exhorted investors to think independently, choose stocks that are not noticed by others, and be a true contrarian investor:

"True contrarian investors are not the kind of investors who buy unpopular stocks when everyone is buying hot stocks (e.g., he is selling stocks when everyone else is buying stocks). True contrarian investors will wait for things to cool down before buying stocks that don't get noticed, especially those that annoy Wall Street. ”

Lynch believes that the main reason for his success lies in his distinctive stock selection strategy: "In the 13 years that I have been at the helm of Fidelity's Magellan Fund, despite numerous mistakes, each stock has risen an average of more than 20 times. The reason for this is that after careful research, I found some unknown and unloved stocks. I firmly believe that any investor can benefit from such a stock analysis strategy. ”

The main differences in Lynch's stock selection strategy are the following aspects:

◆ Do not choose popular stocks, only choose unpopular stocks

People tend to be eager to pursue hot stocks, but Lynch avoids hot stocks:

"If there's a stock I don't want to buy, it has to be the hottest stock in the hottest industry."

The reason why hot stocks are so popular is because their stock prices are rising so fast, so fast that it always feels incredible. Unfortunately, popular stocks fall very quickly, even faster than they rise, so fast that you can't find a chance to get out.

Lynch is passionate about unpopular stocks: "If you find a stock that has hardly been asked about by institutional investors, you find a stock that is only likely to make money." If you find a company that hasn't been visited by analysts or that no expert will admit to knowing it, your chances of making money are doubled. ”

Lynch found that one rule for finding unpopular stocks is that the stocks of companies whose business is boring, boring, and even depressed, usually the unpopular stocks that are rarely sought after, will eventually become big bull stocks with rising stock prices.

◆ Avoid high-growth and volatile industries, and pay attention to low-growth and stable industries

Investing in high-growth industries is almost a mainstream investment strategy in the stock market, but Lynch is dismissive of this: "A lot of people like to invest in exciting high-growth industries, and it's always crowded here, but not me." I like to invest in low-growth industries, such as companies that make plastic knives and forks, but I also only do that if I can't find a non-growth industry like funeral services. It is in this zero-growth industry that stocks are most likely to be found that will make a lot of money. ”

So why is Lynch so different? Because he found that the high-growth industry attracted a large number of smart and powerful companies who wanted to enter the industry to share the cheese, and the entry of many competitors made the competition very fierce, it was difficult for the company to maintain profit margins, and the stock price would fall accordingly. While low-growth industries are also low-competitive industries, companies tend to maintain profit margins, and stock prices will rise with profits.

◆ Stay away from high-tech companies and pay attention to low-tech companies

From 1995 to 1999, it was an unprecedented bull market, the index doubled, and the return rate of stocks was more than 20% for five consecutive years. In this big bull market, people's enthusiasm for high-tech companies such as internet stocks is the biggest driving force. But, in the midst of the frenzy, Lynch once again declared himself a technology averse:

"I've always been a technology averse. My personal experience shows that only those who don't blindly follow the trend can become successful investors. In fact, most of the famous investors I know (first and foremost Warren Buffett) are technology averse. They never buy shares in companies that they don't know about their business, and I do the same. ”

Lynch, like Buffett, never buys shares in companies that don't understand his business, that are changing fast, and that don't have an unstable future. He also insists on investing only in stocks in companies in traditional stable industries that he fully understands. Lynch said: "When there are so many stable industries around, why buy stocks in volatile industries?"

◆ Don't choose a diversified company, pay attention to specialized companies

Lynch is so disgusted with the diversification of companies through acquisitions that he sarcastically calls it "diversification deterioration":

"Companies with good profits usually don't use their money to buy back stock or increase dividends, but prefer to waste their money on the stupid thing of buying other companies." This 'well-prepared' acquisition is targeted by companies that (1) are overvalued; (2) operate beyond their comprehension. These two points ensure that post-acquisition losses, rather than gains, are maximized. ”

Instead, Lynch likes to look for great companies that run professionally. For example, he is very concerned about drawing capital into independent companies. A subsidiary or branch that adopts the practice of capital withdrawal will become an independent and free economic entity. In particular, companies that have become the target of hostile acquisitions in the wave of mergers and acquisitions often get rid of the practice of selling or withdrawing funds, and can quickly repel the hostile acquirers after disassociating themselves from the subsidiary, at which time the shares of the independent subsidiary will be listed independently.

◆ Do not choose companies with more competitors, only companies with fewer competitors

People tend to focus on famous companies that stand out in the fierce competition, and often ignore those hidden champions who have dominated the industry for a long time but are unknown.

But Lynch is different: "I would rather have stock in a local stone processing plant than shares in 20th Century Fox." Because the studio has a lot of competitors, and the stone mill has a 'niche': there are no competitors in the territory it occupies. ”

Lynch has a soft spot for companies with market territories: "I'm always looking for companies that have 'territories,' and the ideal company has a 'territory.'" "This territory gives the company an exclusive right to operate in the territory of the market in which it operates. This exclusivity is exactly the Aladdin lamp that Lynch is looking for: "There is nothing to describe the value of exclusivity... Once you get exclusivity, you can raise the price. ”

Lynch found that Buffett, like him, was very fond of finding good businesses with exclusive rights. Lynch said admiringly that Buffett made billions of dollars by investing in "exclusive" companies.

◆ Don't listen to the inside scoop, just look at the buying actions of the company and its internal employees

For the average investor, there is a brighter but more accurate and reliable method than inside information: that is, to observe the company's employees buying their own company's stock and the company's repurchase of its own shares. This kind of action, on behalf of the company's employees, the company itself is full of confidence in the future, they have the most internal news of the company, the most direct, the most comprehensive understanding, and its buying action is a very positive signal.

Lynch believes that a company's buyback of its own shares is an important sign of confidence in the company's future, and that buying back shares will increase the value of the stock in the long run: "The easiest and best way for a company to return to investors is to buy back its own outstanding shares. If a company is confident in its future, why can't it also invest in its own company's stock like an investor?...... In the long run, buying back shares will only benefit investors. ”

Lynch argues that if the average employee of the company is also actively buying the company's stock, it is a very important buy signal: "There is no kind of inside information that proves the value of a stock more than the company's employees are buying the company's stock." "An ordinary employee who earns $20,000 a year and spends $10,000 to buy the company's stock is certainly an investment move of great significance to himself." But Lynch believes insiders buy the company's stock for only one reason: "They think the stock is undervalued and will eventually rise." ”

Lynch's valuation principle: the price-to-earnings ratio is the mainstay, and the comprehensive valuation is comprehensive

Lynch primarily uses the price-to-earnings ratio for stock valuation.

According to Lynch's six classifications of stocks, the price-to-earnings ratios of different types of companies also vary greatly. Many investors look for stocks with low P/E ratios by comparing P/E ratios between different industries and between different companies in the same industry, and obtain excess investment profits from them. But Lynch reminds us that low-P/E stocks are not necessarily worth investing in: "Some investors think that any stock should be bought as long as it has a low P/E ratio. But this investment strategy doesn't make much sense to me. We should not compare apples to oranges. So the price-to-earnings ratio that measures the value of Dow Chemical's stock isn't necessarily right for Walmart. ”

It's certainly silly to think only about the P/E ratio, but the P/E ratio is a very easy data after all, and it has considerable use for analyzing stocks when used correctly, so you can't ignore it, but analyze it reasonably.

When judging whether a stock is overvalued or undervalued based on the price-to-earnings ratio, it is necessary to make a full and comprehensive comparison. The first is to compare the industry's P/E ratio with the overall P/E ratio of the market; the second is to compare the P/E ratio of the target company with the industry's average P/E ratio; and the third is to compare the historical P/E ratio of the target company in different years.

Regarding the use of the P/E ratio indicator, one of Lynch's advice to investors is: "If you can't remember anything about the P/E ratio, you must remember not to buy stocks with particularly high P/E ratios." ”

Lynch also compares assets per share to stock prices, but he is well aware of the potential risks of doing so: "Book value per share often has little to do with the actual growth of the company, and it often grossly overestimates or underestimates the true growth of the company." "Lynch reminds us that when you buy a stock for book value, you have to think carefully about what those assets are and what the real market value is. When analyzing the company's assets, Lynch placed a strong emphasis on cash on hand. If the amount of cash on hand is large, the price-to-earnings ratio must be calculated after adjusting for the stock price based on the cash on hand. If we don't take into account large amounts of cash on hand, then we underestimate the value of the company's stock.

Lynch will also find companies with modest returns but well worth investing in, largely because of its free cash flow. Usually such companies have a large amount of depreciation of old equipment, and these old equipment will not be eliminated in the short term. Such companies can also continue to enjoy tax relief in the process of reform (depreciation of equipment is tax-free). These depreciations make the company's free cash flow much larger than the cash flow on the statement, and it is easy for the average investor to underestimate its share price. But Lynch defines cash flow very strictly: "If you're buying stocks based on cash flow, be sure that cash flow refers to free cash flow." Free cash flow is cash left behind after normal capital investment expenditures. It's a sum of cash that only goes in and out. ”

Lynch looks at the principles of the stock market: the yield line and the price line

Lynch believes that the ultimate trend of the company's stock price depends on the company's value. Although it can sometimes take years for the stock price to adjust to a level that matches the true value of the company, a valuable company will eventually rise even if its stock price falls for a long time, at least in most cases.

Investors will see on any stock chart that has both a stock price action line and an income line that basically matches the trend of earnings. Lynch summed up the law of stock price fluctuations this way:

"The price line of a stock is related to the trend of the income line, and if the fluctuation of the stock price line deviates from the yield line, it will sooner or later return to the trend associated with the movement of the income line. People may care what the Japanese are doing and what the Koreans are doing, but it's the earnings that ultimately determine how the stock goes up or down. One might judge the volatility of stocks in the market over a short period of time, but in the long run the volatility of stocks depends on the company's earnings. ”

For example, dow Chemical increased its stock price between 1971 and 1975 and 1985 to 1988. Between these two periods, from 1975 to 1985, Dow Chemical's earnings fluctuated greatly, as did stock prices.

Between 1958 and 1972, Avon's earnings continued to rise, and its stock price rose from $3 to a staggering $140. Although everyone is generally optimistic about this stock, the stock price is obviously too high relative to earnings. In 1973, the company's earnings plummeted, disillusioning investors and plunging stock prices.

Lynch's principle for buying stocks: choose the best time

Lynch believes that the best time to choose a stock is to find stocks that are undervalued by the market: "In fact, the best time to buy a stock is always when you are convinced that you have found a stock with the right price, just like finding a good priced commodity in the mall." ”

Lynch has found from years of investment experience that the best trading time may occur in the following two specific periods.

The first timing is at the end of the year. It is no accident that the worst periods of stock price decline always occur between October and December of the year, as brokers and investors are often willing to sell stocks at low prices in order to spend at the end of the year. Institutional investors also like to clear some loss-making stocks at the end of the year in order to adjust their future portfolios. All of this sell-off will cause the stock price to fall, and the impact on lower-priced stocks will be even more severe.

The second type of opportunity occurs during the period of collapse, decline and sharp decline in the market every few years. During these frightening times, if investors are brave enough to calmly buy people while shouting "sell" inwardly, they will seize the opportunity that they once thought would not come again. For those stocks that are doing well and are very profitable, it is a good time to invest in times of market collapse.

Lynch's portfolio principle: concentrate and diversify appropriately

There have long been two completely opposed portfolio management perspectives, concentrated investment and diversification. Lynch is not paranoid about a certain combination model: "Finding a fixed combination model is not the key to investment, the key to investment is to analyze the advantages of a stock according to the actual situation." ”

Lynch argues that the premise for determining an investment is to study and analyze whether stock prices are reasonable: "Suppose you do the right research and buy a stock at a reasonable price, so that you have minimized your risk to some extent." "On the contrary, it would be unfortunate to buy an overpriced stock. Because even if the company achieves good results, investors still have a hard time making money from it.

Lynch believes that investment should focus as much as possible on good stocks of good companies, rather than simply diversifying into stocks that you don't know. Investors should hold as much stock as possible in the following companies: "(1) you have some knowledge of the company; (2) you have found through research that the company has good prospects for development." The result of an investment analysis study may be a stock, or it may be that multiple stocks meet the following criteria, and investors should decide how many stocks the portfolio holds based on their own research judgment. But there is no need to invest in stocks that you are not familiar with because of diversification, and stupid diversification is as terrible as the devil for small investors. ”

But Lynch also believes that in order to avoid some unforeseen risks, it is not safe to invest in only one stock, and it is more appropriate for a small asset portfolio to contain 3-10 stocks, which can both diversify risks and potentially generate more returns.

(1) If you're looking for "tenbaggers," the more stock you own, the more likely it is that a "10x stock" will appear in those stocks.

(2) The more stocks you own, the more elastic your portfolio adjustment, which is an important part of Lynch's investment strategy. Some people believe that Lynch's investment success lies in the fact that he only invests in growth stocks, but in fact, Lynch's investment in growth stocks has never exceeded 30%-40% of the fund's assets, and the rest has been invested in other types of stocks to diversify risk. "Although I own 1,400 stocks, half of my assets are invested in 100 stocks, 2/3 are invested in 200 stocks, and 1% of my funds are diversified in 500 regularly adjusted suboptimal stocks. I'm always looking for valuable stocks in various fields, but I'm not obsessed with a certain type of stock. ”

Lynch believes that the following factors should be considered when choosing the object of diversification:

Slow-growing stocks are low-risk, low-yield stocks; big-stupid elephant stocks are low-risk, medium-yield stocks; if you are sure of the value of the asset, asset-surplus stocks are low-risk, high-yield stocks; cyclical stocks depend on the accuracy of investors' expectations of the cycle, which may be low risk, high return, or high risk, low return. At the same time, ten-fold yield stocks are readily available from fast-growing or transformational distressed stocks, both of which are both high-risk and high-yield types. The more potential the growth stock, the more likely it is to fall.

Lynch believes that in portfolio management, it is necessary to constantly review your stocks, while carefully observing the stock market dynamics, and making appropriate adjustments to the stocks according to the changes in the company and the stock market.

Lynch's shareholding principle: long-term investment is better than short-term investment

Lynch is a long-term investor: "My interest in long-term investing is unmatched. But as the Bible says, it's much easier to preach than to practice. ”

Lynch also noted that due to short-term investors and some professional hedge fund managers, the turnover rate of stocks has become extremely rapid, and short-term transactions have flooded the entire market and have had a significant impact on the market situation, resulting in greater volatility in the market.

But Lynch is very much against short-term trading: "Counting on short-term investment to make money for a living is like making a living from racing cars and gambling cards." In fact, I see short-term investing as a Casino game played at home. The downside of playing Cassino Solitaire at home is that there is a lot of recording work to be done. If you trade 20 times a day on the stock market, you trade 5,000 times a year, and all the transactions must be recorded and then made into statements to make tax returns to the IRS. Thus, short-term trading is nothing more than a game that feeds a large number of accountants. ”...

Remember one of Lynch's aphorisms about long-term investing: "Stock investing is the same as losing weight, and it's patience, not the mind, that determines the end result." ”

Endurance is often better than the mind!

　　Peter Lynch's transformation

　　Peter Lynch, America's most famous, greatest and most successful open-end fund manager, was also keen on short-term trading in the early days, with a 343% turnover rate in his first year as a manager. But it didn't take long for him to discover that "a lot of the stocks I've held for months should actually be held longer." It's not unconditional loyalty, it's about nailing up companies that are becoming more and more attractive, giving up on this good stock early, and responding to the maxim of "pulling up seedlings and growing up", which is my favorite maxim, and I have become a victim myself.

　　People are always looking around for the secret to winning on Wall Street, and the real secret for a long time has been one: buy shares in profitable companies and don't throw them away when there is no good reason. You don't have to be a genius at analyzing which stock to buy; but if you don't have the patience and courage to hold a stock for a long time, you're just a speculator. The criterion for distinguishing an investor's good from bad is not always the mind, but usually discipline.

　　Usually, company performance over a period of months or even years has nothing to do with the price of the stock. But in the long run, the two are 100% related. This difference is the key to making money, being patient and holding good stocks. ”

　　Fifth, the long line is better than the short line

　　(1) The disadvantage of the short-term is that it is frequently bought and sold, and it faces two major problems:

　　1. An imprudent transaction leads to an outing.

　　If the return on market investment is regarded as a multi-round coin-operated competition, there is no doubt that the more you invest, the lower the probability of luck you get, and you are often eliminated without two or three shots. Of course, the market is not as cruel as the elimination system, but sometimes the risk of the market may indeed eliminate investors, such as the sudden bankruptcy and delisting of the selected investment object, etc. This situation is rare, but it is dead once encountered, and when it encounters this situation, it is not the speculator's bad luck, but his imprudent frequent trading.

　　2, the result of long-term frequent operations is lower than the average profit.

　　Some people think that short-term trading can avoid the danger of being hit hard, but even if they avoid risk, they will immediately face a second risk and average their judgment. The probability of judging right and wrong in the stock market is similar to the coin guessing game, only 50% at most, coupled with the influence of psychological factors and the existence of transaction costs, the probability of correctness is less than 40%, or even lower, resulting in lower than average profits.

　　Controlling risk with ignorance can only increase risk; sparrow tactics may survive, but it will never become a high-flying desert eagle.

　　(2) The advantage of long-term investment is that it can take advantage of the long-term upward characteristics of the stock market to profit:

　　1, long-term investment will also be eliminated from the risk, but because long-term investors often have an in-depth study of the enterprise before buying, the selected company often has long-term value, the price is generally more rational, the probability of being destroyed is extremely low.

　　2. As far as the development of the stock market is concerned, the stock price fluctuates randomly. But from five to ten years, it is a long-term upward. Short-term speculation cannot take advantage of this long-term upward characteristic. Only long-term investments can do that.　　

　　The market is almost always surrounded by speculative frenzy, in the market most people are mainly short-term, delusional idea of a day of happiness everyone has, but a few years of cumulative profits even the average increase in the market can not catch up, the efficiency of the market proved that short-term speculation in the face of random stock prices in the face of super profits is to work.

　　The choice of strategy itself indicates the probability of success, most people are mainly short-term, so most people can not make money, they are the market itself; very few people only do smart long-term investment, so this type of people get the most profits.

　　All investment masters are successful by long-term investment, and no one has been famous by short-term speculation in the past and the present (unless it is a negative textbook)

　　Is long-term investment in a market with a high price-to-earnings ratio like ours effective?

　　Some people think that Buffett buys stocks with low price-to-earnings ratios, and his long-term investment theory is limited to mature markets. I don't think so.

　　Chinese and Western stock markets are stock markets, its internal operation law is basically the same, are by some flesh and blood people in the transaction, but there are different characteristics, China as an emerging market is from a high price-earnings ratio of the market to a low price-earnings ratio of the market, will face a long-term slow process, but China is a developing country, many industries will face from scratch high-speed development process, undoubtedly full of many opportunities. There are always some companies that can achieve high growth and continuously lower price-earnings ratios, due to the low price-earnings ratio relative to the entire market, the overall market will have an upward pull effect on it and make the stock price rise for a long time.

　　In this high P/E ratio market, the purpose of investors should be moderate, that is, in the process of the entire P/E ratio being relatively unchanged, or the slow reduction of the P/E ratio of the entire market, find a profit that will be better than most other listed companies in the long run, and make long-term investments.

　　The worst way to study and learn a person is to mechanically apply it, and buying the same price-to-earnings ratio and the same type of stock does not guarantee that you will succeed, because there can be no two identical leaves in the world, and neither you nor Buffett can buy the same stock forever.

　　By the way: Buffett can't just invest in traditional industries to negate the inability to invest in technology stocks for the medium and long term, his reason is that he doesn't understand these industries, but that doesn't stop you from understanding technology stocks, Fisher is a successful technology stock investor.

　　We must adhere to principles and apply them flexibly, and the key to success lies in how to grasp them, but if we do not know what the right principles are, everything will not be discussed.

　　If you grasp the essence of Buffett's thinking, Buffett's three principles can be flexibly applied in any market.

　　The wisdom and ideas of human beings are always passed on and passed on, and greatness can be learned! Even if you can't learn to be great, at least you can learn to be strong.

　　　Fourth, excessive compound interest growth can only harm oneself

　　After understanding the power of compound interest, it is easy to arouse people's greed, and they will dream of quickly achieving the purpose of getting rich with high compound interest, but when they want to seize more opportunities, they lose the opportunities they deserve. Excessive growth will only harm oneself.

　　In a finite world, high growth rates are bound to lead to self-destruction. If the base of this growth is small, then this law does not necessarily work for a period of time. But if the base is large, then the parties will end up with high growth rates eventually squashing its own support points.

　　The American astronomer Segan has described this phenomenon interestingly when talking about bacteria that divide and multiply every 15 minutes. Segan said: "That means turning four times an hour, ninety-six times a day." Although a bacterium weighs only about one trillionth of a gram, after a day of frenzied reproduction, their descendants will weigh as much as a mountain...in two days they will be heavier than the sun... But there's no need to worry, Segan says: There's always some kind of obstacle that's preventing this exponential growth.

　　The historical data of the securities market can tell us that the most prominent compound interest grower, Warren Buffett, has maintained a perennial return on investment of only 24%, and most people do not reach this level.

　　Do not dream of accelerating the growth of compound interest through short-term windfall profits, which no one can do, and a higher compound interest that can ensure long-term growth is already a fairly successful performance.

　　Fifth, the implications of compound interest to us

　　1. Becoming the king of the securities market is not relying on one or two victories, but on long-term and stable compound interest growth.

　　2, due to the high efficiency of the market, long-term compound interest growth with high rate of return is unrealistic, so whenever a very high investment return is obtained, the primary consideration is how to maintain the results, rather than dreaming of taking advantage of the chase.

　　3, do not report too high expectations for high-growth enterprises, a very simple mathematical basis: if the enterprise doubles every year, after five years the entire enterprise will grow 32 times, 10 years later will grow 1024 times, which is obviously unrealistic. Therefore, people who think they have found good stocks and do not have the patience to wait for the low-price buying do not have to worry that the stocks will suddenly fly to the sky one day, and those who have already held good stocks bought at a low level should neither set the short-term profit target too high, nor look forward to the rapid rise of the stocks in their hands every day, and finally lose patience and throw them out prematurely.

　　4, the base is small in the case of easy to produce higher compound interest, but because the base is small, so most people will not pay much attention, will not consider the problem from the perspective of compound interest, made too many mistakes, but hindered the steady growth of funds, this is not the worst, the worst situation is to waste time this priceless wealth and develop bad habits or even unrepentant.

　　Third, Buffett's view

　　1. About risks

　　Buffett believes that beta-value purists do not understand the company's products and competitiveness, but focus on the history of price fluctuations, determine the risk of stocks, can not distinguish between certain inherent risk differences, and often miss the opportunities created by price fluctuations.

　　The risk, he argues, comes from not knowing what you're doing. Investors are more likely to study them closely and grasp their intrinsic value by purposefully focusing their attention on a few selective companies. The more you know about the company, the less risk you may encounter.

　　2. About diversification　　

　　Warren Buffett has repeatedly emphasized: "Diversification is like Noah's Ark, each animal takes 2 on board, and the result is that it becomes a zoo." Although the risk of such investment is reduced, the yield is also reduced, which is not the best investment strategy. I have always adhered to the principle of less and more. I think that most investors do not have a thorough understanding of the invested enterprises, and naturally dare not invest in only one company but have to make diversified investments. However, with more companies invested, investors have a relatively small understanding of each enterprise, and at best they can only monitor the performance of the invested companies. ”

　　Buffett believes that Noah's Ark is the strongest ship, but it is not a ship that can run faster.

　　Buffett went on to argue: "Pluralism only serves to protect ignorance. The strategy we adopt is to prevent us from falling into standard diversification dogma. If you're a knowledgeable investor who understands the financial well-being of a company and is able to spot five or ten reasonably priced companies with important long-term competitive advantages, then traditional decentralization means nothing to you. It will only lower your yield and increase your risk. I don't understand why some investors choose to put their money into a company he likes to be in the twentieth place instead of putting it in a few companies he likes—the ones he knows best, has the least risk, and has the most potential for profit. ”

　　Obviously, Buffett is not entirely against diversification, he is against excessive diversification, against dispersion in companies that he does not understand, and he believes that investors should focus on 5-10 companies that can be bought at reasonable prices.

　　Fourth, the views of several investment masters

　　1. Fisher-Price

　　Fisher, a master investor who is good at tapping into growth stocks, always says that he would rather invest in a few great companies that he knows very well than in a lot of companies he doesn't know. In his 1958 book Common Stock and Non-Ordinary Profits, he wrote: "Many investors, and of course those who advise them, never realize that buying stocks they don't know can be much more dangerous than if you don't fully diversify." Today, 40 years later, Fisher is a 91-year-old man, and he still does not change his original intentions, he still emphasizes: "The best stocks are extremely difficult to find, if it is easy, then everyone can have them." 」 I know I want to buy the best stocks, otherwise I'd rather not buy them. In general, Fisher limits his equity to 10 companies, of which 75% of the investment is concentrated in 3-4 companies.

　　2. Keynes

　　Keynes was not only a great macroeconomic thinker, he was also a legendary investor. Buffett noted in his company's annual report that Keynes's intellect as an investor was more admirable than his intelligence in economic thought, and Keynes wrote to a friend in 1934: "Over time, I have become more and more convinced that the right way to invest is to invest large sums of money in a business that he thinks he knows and that he fully trusts." It is a complete mistake to think that one can limit the risk by spreading one's money among a large number of businesses that he knows nothing about or has no confidence in... One's knowledge and experience is absolutely limited, so at any given time, there are very few companies that exceed two or three, and I think I am qualified to put all my confidence in it. ”

　　3. Peter Lynch

　　It should be said that the early Peter Lynch was a crazy decentralized investment fund manager, and in 1983 his fund portfolio consisted of 900 stocks, which later increased to 1400. He is like a giant blue whale, devouring everything that is conducive to its growth. However, with the increase of investment experience and the decline of investment energy, he is more and more advocating concentrated investment. In his own summary of the 25 Golden Rules, he says: "Holding stocks is like raising children – don't go beyond what you can." Amateur investors probably have time to track down 8-12 companies. Do not own more than 5 stocks at the same time. ”

　　5. Some statistics

　　Robert Hager Strand, vice president and general manager of Leger Mason Concentrated Assets in the United States, conducted a statistical study in which he randomly combined 1200 U.S. public companies over a 10-year period.

　　According to statistics:

　　1. In the combination group of 250 stocks, the highest return was 16% and the lowest was 11.4%.

　　2. In the combination group of 15 stocks, the highest return was 26.6%, and the lowest was 4.4%.

　　3, out of 3,000 kinds of 15 stock combinations, 808 combinations beat the market.

　　4) Of the 3,000 combinations of 250 stocks, 63 beat the market.

　　conclusion:

　　1. In the case of a single concentrated portfolio, concentrated investment has a greater chance of obtaining a higher than the market return, and there is also a greater opportunity to be lower than the average return of the market.

　　2. The number of owned shares decreases, and the likelihood of beating the market increases. With 15 stocks, your chances of beating the market are 4:1, and your chances of beating the market with 250 stocks are 50:1. But the success of concentrated investment is inseparable from the crucial smart stock selection.

　　Sixth, some enlightenment

　　1, a certain amount of diversification can reduce non-systemic risk, but can not obtain profits that exceed the market average.

　　2, to obtain excess profits only concentrated investment 3-5.

　　3, ordinary investors before the capital reaches more than one million, should focus on investing in a company, because after reaching more than one million, the primary consideration is how to keep the fruits of victory, so it is necessary to make stable profits under the premise of dispersing risks; and before millions, there should be a rational effort to strive for greater victories.

　　4. Focusing on investing in a company will have a process of repeated screening, which is conducive to rapidly improving the ability to select stocks.

　　5, focus on investing in a company, so that you can pay more attention to investing in the company you think is the best, more concerned about its basic situation.

　　6, focus on investing in a company, from the perspective of the dealer, you are fighting only one dealer, rather than several bookmakers joining forces against you, can improve the probability of success.

　　7, focus on investing in a company, so that you often consider the problem from the perspective of compound interest, but also easy to calculate compound interest.

Chapter Seven: Are You Willing to Hold the Company You Invest in for Ten Years? 　

　　"A horse that can count from 1 to 10 is a brilliant horse, but not a brilliant mathematician."

　　—Samuel Johnson

　　Buffett believes that as an investor, the goal should be to buy a company with a reasonable price that can grow significantly over the long term, and you must always resist the temptation to deviate from your guidelines. He points out the problem with a very poignant question: Would you rather own a stock for ten years, and if you don't, then don't consider owning it for ten minutes.

　　In the face of this problem, I think 99.999% of people will choose not to want this answer, even I, a loyal follower of Buffett, my honest answer in my heart is also to choose no, generally speaking, I am willing to cling to the period of up to two years, so I can't reach Buffett's realm for the time being, and I think most people can't reach it.

　　In order to concentrate on a small number of stocks with amazing growth in the long term, it is undoubtedly absolutely important and necessary to make the right choice among the vast number of companies.

　　The best investment targets should have three characteristics at the same time

　　1. Broad prospect industry

　　2. Enterprises with strong competitive advantages

　　3. Growing small businesses

　　(1) Broad prospect industries

　　First, industrial differences have a huge impact on enterprises, and even play a decisive role most of the time.

　　Its importance can not be overemphasized, many people have studied for a lifetime and have not yet figured out this simple truth, mistaken research direction, the beginning of the wrong direction is difficult to lead to the right result, just as it is difficult to reach the destination you are going with the wrong map.

　　Industrial differences have an impact on corporate profits. Like the different classes of life, being born as aristocrats and being born as commoners has an incomparable opportunity for success, and the difference in the social division of labor will bring different labor remuneration, such as lawyers, private doctors earn more than ordinary workers, and their career stability is also higher. Therefore, depending on the industry, the profits obtained by the enterprise, the competitive pressure it bears and the opportunities for success are also different.

　　Second, getting on the right boat is more important than finding a good rower

　　The company's management is often changed, and the business strategy will sometimes behave in a hurry without rationality, but the consumer's demand for good products and services will never change, in an industry where the public has urgent needs, as long as the manager does not make too stupid mistakes, often can make the enterprise get better benefits, the decisive role should be a good industry, but not necessarily the manager's superhuman wisdom.

　　Buffett repeatedly emphasized this: "A good management record is not so much about you being efficient as it is about which boat you are on." When managers with a glorious reputation have to deal with companies with bleak futures, chaotic management, and bad reputations, only the company's reputation will not change. If you find yourself in a boat that has been leaking for a long time, building a new boat is much more effective than plugging in the loopholes. Good knights will give full play to good horses, not weak old horses. My opinion on the matter has never changed. ”

　　The real best business is something that "fools" can manage, and "sooner or later there will be a fool who climbs to the position of the chief of knowledge." The original meaning of this statement is not to say that management is not important, but to say: 1, it is difficult to understand a manager 2, in the face of the industry's difficulties, it is difficult for smart women to cook without rice 3, sometimes you trust the management will also disappoint you.

　　But the industry will not deceive people, the development of the industry, the demand for products can not deceive people.

　　(2) Enterprises with strong competitive advantages

　　Find the best rower in a good boat

　　An enterprise is composed of operators, so its behavior inevitably bears the characteristics of an operator, and its behavior has a commonality of human beings.

　　Enterprises in industry, like individuals in groups in life, have a distinction between leader and led, and the good ones are always a few, most of them average or stupid. Even if they are all a bunch of fools, the fools can be ranked according to how much knowledge he knows. Investors should focus on finding good minds, and if they really can't find them, they should pull out the generals and find the smarter fools.

　　Keeping this in mind helps us understand and find good businesses, and believe that good businesses are bound to outperform most average businesses.

　　Second, strong competitive advantage is a common feature of good enterprises

　　Analyze the core of the enterprise - competitive advantage, and select the core criterion of the enterprise - competitiveness.

　　Lao Ou said in his collection: "The development of contemporary information technology, the acceleration of technological innovation, and economic globalization have made the competition of enterprises unprecedented. If an enterprise does not have considerable competitiveness, its survival will soon become a problem, and even whether it exists or not will become a problem, and what value and growth will it be?

　　For enterprises that are not competitive in the slightest, they are facing closures at any time! This is the same for that company, and the same for listed companies! If the problem of cultivating the competitiveness of enterprises is not solved from the mechanism, sooner or later the securities market will become a slaughterhouse for investors, and perhaps you can say, "After I die, the flood will be terrible!" "But maybe when this day comes, God won't tell you, because God's money is also stuck in the stock market."

　　Or rely on yourself. Add a few more insurance locks to your investment. And the competitiveness of enterprises is the most secure of them. Competitive advantages can also be divided into different strengths:

　　First-class advantages: (1) technological leadership, (2) monopoly, and (3) resource monopoly

　　Second-rate advantages: (1) brand influence, loyal customers (2) high market share

　　Third-rate advantages: (1) uniqueness of products and services, (2) management and talent( 3) cost

　　Criteria for measuring the strength of a company's competitive advantage:

　　1, it has the advantages, other enterprises have?

　　2. Is this advantage easy to imitate?

　　3. How long can this advantage last? How much contributes in the competition?

　　4, the enterprise to maintain this advantage to do what work

5. What are the obvious disadvantages of this company? ”

　　Third, some simple characteristics of the internal quality of the enterprise

　　1. The main business is distinct

　　It is important to have a clear main business. It is undeniable that there is a generalist in this world, who is better than others in everything he does. However, most people do not have this ability, and people's energy is limited, and no one can stand fighting on all sides. Therefore, I believe that only those who concentrate on doing one thing can do things well, and the main business should be the characteristic of a good enterprise.

　　Suppose you need an electrician to decorate your house and lay out the circuit, you can't hire a self-proclaimed pianist on Monday, a gardener on Tuesday, and a writer on Wednesday、...... Sometimes the guy who also doubles a little bit of woodwork unless you're also an irresponsible person.

　　2, high gross profit

　　The tax policy is different in different periods, and whether enterprises use financing to expand production and the proportion of adoption varies, but how much cost generates and how much profit is relatively certain.

　　Gross profit is a quantitative indicator of the profitability of enterprises, generally speaking, the gross profit is higher than that of competitors in the same industry, with strong competitive strength and higher management level. If the gross profit of the entire industry is low, it is a manifestation of the deterioration of competition. Be wary of businesses that serve a small number of specific targets and rely on high gross margins to survive.

　　3. Low debt

　　Debt is a double-edged sword, that is, enterprises may expand production through debt management to obtain higher profits, but they may also be dragged down by heavy debt burdens.

　　Many promising small businesses are not good at using financial leverage, resulting in heavy debt and difficulty in capital turnover, resulting in workers' strikes, senior employees resigning, and borrowing without access to loans.

　　Low debt, while conservative but safe, is relatively rational and easier to survive even in the face of unpredictable economic depressions.

　　(3) Growing small enterprises

　　Peter Lynch said in Beat Wall Street: "Investing in big and small businesses can make money, but if you focus on small businesses, you may do an amazing job!" The 'small' is not only beautiful, but also the most profitable. He then added: "For small companies, it's best to wait until they have a profit before investing." ”

　　It can be seen that there are countless opportunities for growing small businesses, but there are also countless risks, many small businesses have been eliminated in the tide of the market, and only a very small number of successful people have survived, and achieving initial profitability is a basic measure of survival.

　　Stock price and the growth of enterprises are closely related, a small business growth ten times, its stock may double twenty times, although the long-term high-speed growth is unreliable and even dangerous, but because of the small starting base of small businesses, in the face of a huge market, several years of rapid growth can be done, if investors can find early in an emerging industry has a strong competitive strength is destined to become an industrial giant of small enterprises, undoubtedly is to find a huge gold mine.

　　On how to find growth stocks, Fisher has made a wonderful discussion in his "How to Choose Growth Stocks", and it is not necessary to say more here, investors must eat through his spirit - to tap and hold long-term competitiveness of high-speed growth enterprises.

　　It is worth noting the new characteristics of choosing a growth-oriented small business: with the development of the new economy, the use of information technology, the product cycle is shortened, the competition is intensifying, and if it can survive, it will occupy the market. Become the overlord and the winner takes all!

　　Profit growth in corporate financial statements occupies a less important position in the selection of stocks, the study of the competitive strength of enterprises occupies an increasingly high position, and it is most important to find out the leader of the future industry and the hegemon of the future industry.

　　(4) How to measure the value of the enterprise

　　First of all, no one can set a standard value for the enterprise, because the enterprise and the world are constantly changing, the value of the enterprise can only be a relative range, and the price can never be equal to the value.

　　Judgments about value exist only in the investor's freewheeling testimony, there is no same standard, even if you are a financial expert who can accurately calculate the business, the final result is only your personal price, not the value of the market. Greggham, Buffett, Fisher, and Lynch each have their own value metrics, but that doesn't stop them from investing.

　　Investors' profits can only be generated by the price difference, and the criterion for judging whether the price is low can only be based on the reasonable pricing of the market relative to the past and the future market, and the correctness of this judgment depends on the comprehensive ability of the investor.

　　Some people very mechanically self-identify a criterion: they must wait until an absolutely safe price that is lower than the value area, and the result can only be absolutely unaffordable, or wait until the end of their lives, but there is no opportunity to enjoy.

　　If even Buffett will change the standard from "very attractive price" to "attractive price" in order to invest in a good business, and believes: "It is better to buy an ordinary business at an extraordinary price than to buy an extraordinary business at an ordinary price." So how can you rigidly define the true value of a company according to your own price-to-earnings ratio standards?

　　Blind low-price strategy can only fall into one low-price trap after another, such as: environmental protection stock price in 1999 yielded 0.73 yuan, how can you imagine that it can fall from 37 yuan in 2000 to 13 yuan today. True security and value can only come from the long-term development and long-term competitiveness of the enterprise.

　　My current criterion for judging is: find a good company, and the price of this enterprise has indeed undergone a long and sharp adjustment of one or two market panics, the price-earnings ratio has reached a relatively reasonable range, and the long-term development of the enterprise will continue to move forward significantly, then I think the value of this enterprise is undervalued.

　　　Chapter Nine: Can You Overcome Yourself?

　　"The market, like God, helps those who help themselves."

　　Warren Buffett (USA).

　　There are many bad things in human nature, such as eating laziness, greed, arrogance, liking to be recognized by others, refusing to admit mistakes..... Only by overcoming these shortcomings can people exert their greatest talents.

　　The unity of knowledge and action is a difficult thing to do.

　　Even if you have more knowledge and the best weapons and methods, if you can't overcome your shortcomings, you still can't use these things well to succeed. Successful people are often people of high moral character, such as outstanding people in all walks of life, and successful investors should also have some basic qualities that are crucial to investment, such as patience, bravery, modesty、.... wait.

　　1. Endurance and perseverance

　　Due to the drastic changes in the stock market, there is always someone who can't grasp himself, who is deeply skeptical of his choices, who needs to find a system of reference, who is eager to know the results of his actions, and who tries to take all the information in. On the other hand, the sharp changes in the stock market and the frequency of sending out information that coincide with the concerns of investors are also quite high, which affects people's perceptual systems and produces inaccurate understanding of information. The market is full of well-educated and experienced investment professionals, and their best practice is to make the market more crazy and chaotic, only in this way can they appear smarter and more rational than retail investors, and the pressure felt by stock investors is very large.

　　Although you have made the right judgment and made a brave decision, you will not succeed without endurance and perseverance, the development of the enterprise is a long-term and gradual process, and not having the patience to wait is tantamount to pulling out seedlings, and the result is often counterproductive.

　　Of course, long-term patience is hard to do, and even Buffett sometimes makes this mistake. Buffett criticized his mistakes in investing in the airline industry: "I admit that I have the same desire as others. Eager to do something, especially when there's nothing to do. ”

　　But we can't stop trying because we have difficulties, although you can't do the most patient thing, but as long as you try your best, you will get more rewards than not putting in the effort at all.

　　In terms of endurance and perseverance, I thank my father all my life, if it were not for his education and training for me since I was a child, I would have made many mistakes in my life, and I would not have been able to have today, and patience has laid a solid foundation for my future investment career.

　　Second, bravery and self-confidence

　　Bravery and self-confidence are mutually reinforcing and inseparable. Brave performance is mainly in action, and self-confidence is mainly manifested in thought, self-confidence determines bravery, the impact of the two on investment is quite important, just imagine if you are not confident and not brave, in the face of high-risk markets, how can you make investment decisions.

　　Speaking of self-confidence, I would like to thank my wife for her continuous encouragement to me, people's self-confidence is impossible to get too much from their parents, because their evaluation of their children is usually not objective, self-confidence can only be obtained from the affirmation of the outside world, and the spouse is the most and most reliable source of information, the ancients cloud: starting a family, there is still a certain truth. (Of course, these are digressions.) ）

　　Two characteristics of bravery: 1. The ignorant are fearless. 2. Great wisdom and courage.

　　The former is because they do not know where the risk comes from, the latter is because they know the inevitable law of the development of things, and can grasp the courage to control the risk; the two have little difference in short-term effects, but in the long run there is a world of difference; the success of the former lies in luck, but luck is rare and infrequent, and the success of the latter is based on the objective analysis of things, and his results are inevitable and long-term effective.

　　Most investors are foolish in the market, and the transition to wisdom can only be achieved through learning, as La Roche Fuco said in Reflections: Moral Aphorisms and Proverbs: "The greatest talent is the ability to evaluate things according to their true values." "Only by understanding the truth of things can we be truly brave."

　　The importance of bravery in investing:

　　1, the courage to do the loneliest thing;

2, the courage to do the most patient things;

3. Have the courage to admit their mistakes;

　　4. Have the courage to adhere to correct judgment.

　　Of course, all this bravery is based on your correct judgment of things. Gregam said, "You don't judge right or wrong because these people disagree. You are correct because your data and reasoning are correct. ”

　　Third, modesty and prudence

　　Self-confidence and bravery sometimes develop into arrogance and bravery when they are not good at control, and things are usually harmful to go against the grain, while modesty and prudence are the best constraints on themselves.

　　Modesty can make people progress, and no scholar is an arrogant person, because the more they study, the more they feel that they are small in the face of knowledge, and the sages are still like this, what capital do the laymen of my generation have to be proud of?

　　Caution reduces rash mistakes, and while being too cautious can miss some opportunities, "to be the first, you first have to run the full distance." "It's not terrible that you lose a few opportunities, and (in fact the stock market is always full of opportunities) what's scary is a fatal blow of error."

　　Be confident and brave in what you are sure of, and be humble and cautious about what you don't understand.

　　Only with the quality of humility can we have the courage to admit mistakes, and we will not make mistakes to the end.

　　Marty Schwartz said: "No matter how successful investors are, there will be times of mistakes, but the attitude towards losses is different, and different attitudes bring different results." The reason why most traders always end up losing money is that they would rather lose money than admit their mistakes. ”

　　4. Solitary giving calm

　　People are lonely all their lives, and no one can help you, only rely on themselves. This is especially true of the securities market, because the nature of a zero-sum market dictates that everyone is your enemy. The result of conformity is destined to be profit equalization, to become a person who does nothing, successful investors must be brave against the public, to take pleasure in loneliness, you do not have to care about the opinions of others, you just need to study your own judgment is right or wrong, and strive to become a minority.

　　Seeking defeat alone is indeed a very high realm.

　　Lonely people tend to be calm.

　　Calm is also an indispensable quality for investors, the market is in a state of madness in many cases, few people are not affected by it and make irrational behavior, calm investors are to have a little laugh to see the tide rise and fall of detachment.

　　Only by waiting calmly can we wait for the big opportunity.

　　Mark Weinstein said: "I don't lose much money in trading because I'm good at waiting for real opportunities. Most people are not good at waiting for the right moment, and they hurry into the forest when it is still dark, and I will wait until dawn. Although the cheetah is the fastest animal in the world, able to catch any animal on the prairie, it will wait until it is fully sure to catch its prey, it can wait in the bush for a week, just waiting for the right moment, and it is not waiting to catch any small antelope, but a sick or broken foot of the small antelope, and it will only catch it when it is foolproof. For me, that's the epitome of a truly professional way of trading. ”

　　The dialectical relationship between independent thinking, flexibility and principle、...... There are too many factors that affect success, not all that can be discussed in this short article, I just talked about some of what I think is the most important, no doubt this chapter is the worst I have written, and in the years to come I will continue to revise this chapter, not perfect, just leave some regrets.

　　Notes, drawing snakes to add feet - my experiment

　　"I've always believed that my own eyes are far better than anything else."

　　First, my research ideas on investment

　　1, why it is more and more difficult to make money in the market, because the market is becoming more and more mature and efficient;

　　2, but the market is not always efficient, it always provides some large or small opportunities, in order to make a profit must seize the big opportunity;

　　3. The big opportunity of the market is not in short-term profiteering, but in the long-term upward characteristics of the market, the essence of which is driven by the industry in the rising life cycle;

　　4, history has proved that simple long-term holding strategy is better than most active strategies, so try not to leave the market; the success of frequent operations is a small probability event, long-term investment can get the most speculative luck;

　　5. The secret of long-term investment profit - compound interest;

　　6. Special methods to improve profit efficiency and safety - centralized investment;　　

　　7, in order to get stable compound interest, focusing on good industries and enterprises is double insurance; only invest in industries with long-term development potential; select good enterprises with super competitiveness in good industries; new shares, sub-new shares are an important driving force to promote the market, there are often some emerging industries, so it is necessary to pay attention to; a very small number of pre-record highs of old stocks have certain value, but it is best not to pay attention to;

　　8, good at the use of technical analysis can expand the safe space, get higher compound interest; the use of technical analysis to choose the right time, so that after buying, it is difficult to fall to their own price, or a long-term price that is not easy to produce major losses. Trying to avoid stop loss is the best stop loss strategy.

　　9, investment must have a certain intensity, high quality is the most real strength; leading the active rise is the most obvious objective strength; higher stock price is the basic strength is also the least valued intensity, the combination of the three can improve the success rate;

　　10, people's energy is limited, the larger the market, the more to focus on a small range of high probability opportunities. The methods I have studied and applied are only applicable to small caps, sub-new, high-priced, and technology stocks, and don't try to seize all opportunities. It's much easier to find gold on the edge of a gold mine than in a garbage dump, not to look at stocks below 20.

　　11, good industries and enterprises are usually liked by the public, the price is often overvalued, buying in the falling market or buying at a low level after a long adjustment, is a better choice, although this price is not necessarily extremely cheap, but it is more reasonable. It's at least in line with one Buffett principle: it's much better to buy an unusual company at an average price than to buy an average company at an unusual price.

　　12. Whether effective methods can be successfully applied lies in the maturity of investment philosophy.

　　Second, my principles

　　1, the first principle: safety! compound interest!

　　2, buying principle: if you are not willing to hold for ten years, do not consider holding for ten minutes; if you do not want to buy the full position, do not buy a share.

　　3, selling principle: God wants to make it die, must first make it crazy; there is no better opportunity and more certain opportunity, do not sell your stock easily.

　　4, long-term holding principle: endurance is better than the mind; do not easily leave the market.

　　5, the principle of action: do not imagine what you can not draw; do not do things that are not sure.

　　6, the principle of technical analysis: vague correct is far better than accurate error, as simple as possible.

　　7, the basic principle of analysis: eagles sometimes fly lower than chickens, but chickens can never fly to the height of eagles.

　　8, stop loss principle: good buying for a successful sale laid half of the foundation, the stop loss at the very beginning.

　　9, the principle of waiting: the money in the stock market can never be earned, but the money in your hand can be lost, do not affect your own operation because of the profits of others

　　Third, the teachings of the masters that I will remember for the rest of my life.

　　1, Fisher said: "After studying my own and other people's investment records, there are two important things that must be paid special attention to, first of all, investment to make a lot of money, must have patience.

　　In other words, it is often easier to predict what level the stock price will reach than how long it will take to reach that level. Second, the stock market is inherently deceptive to investors. Following what everyone else was doing at the time, or doing it with an irresistible cry from within oneself, often proved wrong in hindsight.

　　Even if a company's stock price appears to have reached or is nearing a temporary peak and may fall sharply in the near term, I will not sell the company's stock as long as I believe it is worth investing in the long term. If I judge that the prices of these stocks will rise much higher than they are today in a few years, I'd rather hold on. My belief stems from the measurement of fundamental factors in the investment process. Companies with strong value-added potential are hard to find because there are not many such companies. But if we can understand and apply good basic principles, I believe that there must be a difference between a truly excellent company and an ordinary company, and the accuracy may be as high as 90%.

　　Predicting the performance of a particular stock over the next six months is much more difficult. .... For these reasons, I believe that no matter how well you refine your forecasting skills, it is difficult to accurately predict the short-term trend of the stock price more than 60%. And that estimate may be too optimistic. That being the case, it is unreasonable to decide to sell stocks with a 90% chance of being correct when the probability of being correct is at most 60%. >2, Lynch said: "The key to making money in the stock market is not to be scared away. This point cannot be overemphasized. Every year there are tons of books on how to pick stocks, but if you don't have a strong desire to make money, all the information is in vain.　　　

No matter what method you use to select stocks or funds, the ultimate success depends on an ability to persevere into the success of the investment despite the pressures of the environment; it is not the brain but the endurance that determines the fate of the investor. A sensitive investor, no matter how clever he is, is often thrown out of the market by the inadvertent blows of fate.

　　It's hard to find an investor who claims not to be a long-term investor. But when the stock price falls, the real test comes.

　　People suddenly become short-term investors, even though they have vowed to be long-term investors. They are emotionally controlled and forget the reasons for buying stocks in the first place – owning shares in good companies – and they panic because the stock prices are low. Instead of waiting for the stock price to pick up, they are throwing the stock at a low price. Undoubtedly, the stock price is the lowest at this time.

　　No one forced them to do so, and they themselves were in a hurry to lose money.

　　Market speculators try to predict short-term fluctuations in stock prices in the hope of making quick profits. Very few people make money in this way.

　　Trying to follow the rhythm of the market you will find yourself always exiting the market when the bottom of the market is about to reverse, and entering the market when the market rises to the top, people will think that they are unlucky because they are unlucky, in fact, it is only because they want to get into it.

　　No one can be smarter than the market.

　　You can say to yourself: 'The next time the stock market falls again, I'll ignore the bad news and buy the falling stock.' But because each crisis looks worse than the last, it's getting harder and harder to ignore bad news.

　　In the 70 years in which stocks have triumphed over bonds, there have been 40 sharp declines of more than 10 percent, 13 of which have fallen by more than 33 percent, including the plunge in 1929.

　　There may be a bigger stock market crash, but since I don't have the weapons to predict it, what's the point of trying to protect myself in advance? Of the 40 contemporary stock crashes, if I sold out every time, I would regret it every time. Even in the event of the biggest stock crash, the price of the stock will always rise back.

　　The stock market decline is not an amazing event, it is a cyclical event — like the cold air in Minnesota. When winter comes, you put on your coat and tell yourself that summer is coming, without thinking that glaciers will cover the whole world from now on. ”　

　　3. Buffett said: "The occasional outbreak of fear and greed, two highly contagious disasters, will always appear in the investment world." The timing of these epidemics is unpredictable. The market insanity caused by them is equally unpredictable, both in duration and in terms of the degree of contagion. So we can never predict the coming or departing of any kind of catastrophe. Our goal should be quite modest: we are only to be afraid when others are greedy, and greedy when others are afraid. ”

　　"We will continue to ignore political and economic prophecies, which are costly pastime for many investors and businessmen." Thirty years ago, no one could have predicted the widespread spread of the Vietnam War, wage and price controls, two oil crises, the resignation of the president, the collapse of the Soviet Union, the 508-point drop in the Dow in a single day, or the fluctuation of short-term bond yields between 2.8% and 17.4%.

　　But surprisingly, these giants did not have the slightest impact on Greggham's investment principles. Nor did they lead to ridiculous agreements to acquire good companies at outrageous prices. And imagine what our price would be if our fear of the unknown led us to delay or alter the use of capital. In fact, we usually make the most successful acquisitions when people's fears of something macro reach their peak.

　　Fear is the enemy of fashion-seekers, but the friend of conservative and stubborn fundamentalism. ”

Article last published on: 2011-04-04

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This article is linked: https://blog.csdn.net/ocean181/article/details/6301742

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