If you are planning for investment do not trust warren Buffett.
How to invest like warren buffet? Oh okay. How to become rich like warren buffet by investing in stock market? This search term must be one of the most searched term by any candidate investor I mean baby investor when they start searching for stock market or any investment opportunity and now a days, he is worth around $80 billion dollars. Which makes anyone who interested in investment and stock market search for these terms. Warren buffet is so much successful that we always try to follow him. But, remember one thing we are unique in one or other way. Every human has different fingerprint. So, you don’t have to choose the path to success that warren buffet chose. I mean it is not very much possible because warren buffet grew up in some different environment. Remember warren buffet’s dad was politician though he didn’t ask his parents for money but he was living much comfortable life than most of us. Same applies to bill gates and mark Zuckerberg. They born in upper-middle class family that helped them to get boost for their businesses. Of course, there are many rich people to grew from nothing to everything but I am focusing on the quality of conditions they grew up in that helped them to see and grab the opportunity. Even warren buffet told he bought his first stock when he was 11 years old. Do you remember what we were doing at 11? It would be fun to see your reaction in comment section. So, Comment in what you were doing at 11. So, back to the topic. For a moment let’s say by doing things the same way legendary investor Warren Buffett does them, you should be able to (more or less) mirror his results.
But, Chasing the rich investors like warren buffet isn’t necessarily a great strategy for all investors, though. When he thinks about particular stock, he has his own views and perspective to look at that stock .and His goals and reasons for stepping into a particular position may or may not align with yours. In fact, they probably won’t. and Because of that, you may not agree 100% why he chose that particular stock or why he closed his position and all. Today I will be discussing the three biggest reasons you’ll want to think twice before following in Buffett’s stock-picking footsteps.
Whenever warren buffet is addressing people the huge portion of them are either doing regular jobs or even if they are doing businesses most of them are regular business people not the billionaires who can expand their portfolio like warren buffet do. And first of all he is not saving for his retirement. Majority of us invest in stock market to beat the inflation and to have enough money so that we can live our retirement life comfortably. Warren buffet worth $80 billion dollars. And top of that he lives really simple life like all of us. He literally doesn’t care about his retirement. Because, if we look at today’s warren buffet it seems he is never going to retire.
There are some exceptions among us but, handful of investors may already have a fully funded retirement in place, but majority of us have to grow a portfolio during our working years and then make that nest egg produce a reliable income during our golden years. Broadly speaking, that means we lean heavily toward growth investments while we’re younger, and then shift toward value and dividends as we age. And it is really difficult to speed up phases. There are still few exceptions among us that starts gambling and by luck hit jackpot stock. But that is really very rare and probability of hitting jackpot stock is super low.
Warren Buffett’s most recent estimated net worth is on the order of $80 billion, however. He doesn’t need to worry about the optimal mix of growth and dividends and perfectly timing the shift from the former to the latter, however, as he’s got more than enough of both all the time to support his relatively modest lifestyle. And during one conference when someone asked him ideal time period to hold particular investment, he said he would love to hold it forever and When he says his favourite holding period is “forever,” he’s not kidding.
You can’t acquire entire companies. But, buffet can. Everyone following Berkshire hathway knows in which companies Berkshire has invested in. And they know it because those companies are publicly traded companies. But, there are many privately held companies that Berkshire Hathaway bought. And only handful of people knows about those companies.
You probably know Buffett’s Berkshire Hathaway has a huge stake in Apple and holds huge positions in Bank of America and Coca-Cola. What you may not realize is that a great deal of Berkshire’s holdings are privately held companies, such as See’s Candies, Acme Brick Company, utility company PacifiCorp, Geico Insurance, and grocery logistics outfit McLane Company, just to name a few. There are many.
These organizations don’t have a quantifiable market value, as they’re not publicly traded. They do, however, contribute cash flow to Berkshire’s overall operation. Whatever the profit they produced straightaway goes to Berkshire Hathaway’s account. And these profits produced by these companies are not even small as you think. Don’t even underestimate those companies as these privately held investments accounted for about $24 billion of last year’s earnings attributable to Berkshire shareholders, and perhaps more importantly, these entities smooth out the volatility of gains and losses from the rise and fall of Berkshire’s stock holdings. In fact, they give constant income to Berkshire Hathaway. Isn’t its smart move by this largest investment company?
Of course, as the owner of these entities, Berkshire and Buffett exercise control of their operations to their long-term advantage rather than the short-term results that shareholders generally demand. And that makes a solid foundation for any company. When you take time, you can focus on things more deeply and that leads to solid implementation of companies’ vision. And that’s what makes company profitable In long-run. As warren buffet is the person with solid patience. He loves to wait and grab profit like monster.
Finally, there are some sweet deals that can only be made by billionare warren buffet. Warren Buffett usually holds stakes in the very same stocks ordinary investors can own. That’s not always the case, though, and these one-offs are a key part of the reason Berkshire Hathaway’s performance is, on average, better than the broad market’s. Because of his powerful connections and huge money lying around him he can make deals like no one can. Because, of this even if normal stocks are trading low Berkshire hathawy remains on the top off the game.
Take, for instance, Buffett’s 2008 agreement with Goldman Sachs. Like most other banks, Goldman was wrecked by the meltdown of the subprime mortgage market and the subsequent recession. Desperate for capital at the time, Goldman sold Buffett $5 billion worth of preferred stock, yielding a pretty sweet dividend of 10%. The bank also granted $5 billion worth of warrants to Buffett, allowing him to purchase Goldman Sachs common stock at a price of $115 in the future. The preferred shares netted Buffett a profit on the order of $3.7 billion in dividends and gains by the time Goldman Sachs bought them back in 2011. Before the warrants expired in 2013, the Oracle of Omaha sold them back to Goldman for $2 billion, plus picked up more than 13 million shares of Goldman Sachs common stock that went on to log big gains of their own.
Unless you had an extra $5 billion lying around that you were willing to risk when things looked bleak, you probably wouldn’t have been able to take on the same sort of trade. And that pretty much sums up power of money. And because of this he can always steer Berkshire Hathaway ship even in storms to make to the glory of profits.
So, what all this discussion actually means to you? I mean You can still use Berkshire Hathaway’s holdings as a way of generating ideas for your portfolio. Don’t get the wrong idea. Just be sure that position makes sense for your particular situation, and not just Warren Buffett’s. As you know warren buffet has many positions in companies to whom we don’t have access and everyone should consider amount of money they can invest in stock market. As I already said most of us are regular 9 to 9 job people and we get really small portion of our income to invest in stocks by adjusting household expenses, food, transport and all those daily activities. So, just get gist of on what sector warren buffet is trying of bet on and keep investing.