Advice from Warren Buffett: Ig
As an investor, it can be difficult to prevent outside opinions from influencing my investment decisions. Every day I read a handful of investment reports and annual reports and spend hours reading newspaper articles. Each of these could potentially affect the way I think and lead me to an investment decision that I will regret later. I also have to monitor the market constantly, which can be incredibly difficult in times of volatility.
Many investors will not have the same problem. Maybe they can turn off or go to work. Most jobs don’t involve looking at the stock market every 10 or 15 minutes to find a price or valuation ratio. As an investment journalist, I realize that I face a challenge that many other investors will never face. Nonetheless, for those of us who have investment-related jobs and who constantly read and think about the stock market, I think the processes I have tried to develop to circumvent the potential psychological impacts of the issues described below. above might be helpful.
A busy place
One of these processes is based on something
Warren Buffett (Shops, portfolio) told Berkshire Hathaway 1994 (BRK.A, Financial) (BRK.B, financial) annual meeting of shareholders.
During the meeting, an investor asked Oracle if they had an opinion on a recent article in Barron’s financial magazine. The article had attempted to calculate the intrinsic value of each Berkshire share. Buffett responded by saying he didn’t think the approach used was appropriate, and added:
“But everyone in the securities markets makes choices about it. Every day someone sells a few Berkshire stocks and someone sells – buys – and, you know, they probably come up with differing opinions. on the assessment. “
After providing another critique of Barron’s assessment, Buffett continued:
“It really doesn’t make any difference. I mean, what – we don’t pay any attention to what people say about Coca-Cola (KO, Financial) stock or Gillette stock or one of those things. I mean, on any given day two million shares of Coca-Cola can be traded. That’s a lot of people selling, a lot of people buying. If you talk to one person, you hear one thing and you talk to another – you really shouldn’t be making securities decisions based on what other people think. If you do this, you should think about doing something else “
I think this is a point that all investors should keep in mind. The marketplace is a complex organization, with thousands of individuals placing billions of dollars in transactions every few minutes. Each transaction has a different reason and each participant will think something different from the other.
This is why investors can benefit from ignoring short-term market movements and reading investment advice articles. These articles can provide additional information or a starting point for further research, but they should never be part of an investment analysis. The writer will have different opinions and experiences, which may influence the final conclusion.
Of course, an investor can’t confidently view investment articles if they don’t understand the business in the first place. This is the most crucial factor. Investors need to understand in detail the businesses they own. Only then can other opinions be completely ignored. There will always be room for criticism and different points of view, but if you first understand the desirability in detail, it is easy to overlook any artifice.
Simply put, every investor has a different idea of a stock’s value, and the only way to make sure your idea is the right one is to do research.
This is the approach that has defined my investing mentality since I first read these comments from Buffett. If I don’t understand something, I have the possibility of being easily swayed, so I stay away. It’s that simple.
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