Archive for March, 2010

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Buffett’s Investing Secrets

March 31st, 2010

Warren Buffett is the unofficial holder of the “world’s greatest investor” title.
Here are some of his investing nuggets.

The idiot principle
Go for a business that any idiot can run, because sooner or later, any idiot probably is going to run it.

Keep a wide safety margin
A margin of safety simply means buying in at a price well below your best estimate for a stock’s intrinsic value. In other words, don’t just because the companies are great and have strong moats. Buy them when they are great companies selling for good to great prices.

The inner scorecard vs. outer scorecard concept
“If the world couldn’t see your results, would you rather be thought of as the world’s greatest investor but in reality have the world’s worst record? Or be thought of as the world’s worst investor when you were actually the best?”

The false precision trap
“We like things that you don’t have to carry out to three decimal places. If you have to carry them out to three decimal places, they’re not good ideas.” In other words, keep the big picture in mind.

A stock is the right to own a little piece of a business
We frequently divorce a stock from its underlying company, especially when the market is delivering up a volatile stock price. Remember that in the long run, a stock is only as good as the company backing it up. Exactly as how a promise is only as good as the person making it.

“Intensity is the price of excellence”
When asked what the most important key to his success was, Buffett answered “Focus.” Microsoft founder Bill Gates answered the same way. Buffett reached his current heights not only because of his brilliant mind, but also because of a focus that has had him analyzing stocks for hours on end, just about every day, for decades. For the armchair investor this means stick to buying and holding index funds and ETF’s, unless you have the time to dedicate to individual stock picking.

How to become rich
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” Remembering the Buffett concept of an inner scorecard, and the Rudyard Kipling admonition to “keep your head when all about you are losing theirs,” can lead to outsize returns as the market sways back and forth.

Leverage
For regular investors, buying stock on margin replicates this risk. Don’t do it.

The “moat” concept
Buffett looks for companies with moats, or sustainable competitive advantages. The strength of Coca-Cola’s moat (its brand) is why he believes a ham sandwich could run it. The stronger a company’s moat, the more likely it will be a leader for decades rather than years.

The Snowball
Buffett’s definitive biography, “The Snowball,” is titled so because it sums up his life in two words. Over everything else, Buffett believes in the power of patiently compounding over time.

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For many of us it’s still a downturn

March 30th, 2010

Take control of your career during the downturn
With prospects for new jobs still looking grim for many people, some graduates of business schools are struggling to take their careers to the next level. The marketplace has wavered between resilient and impossible, but opportunities are beginning to present themselves.

Available strategies
There are two distinct strategies available. The first is to find ways to make yourself more marketable for when companies start to hire again and the second is to seek opportunities with your present employer.

Don’t get stuck
You get stuck – you need to be an active player in shaping your own future. Whether you are a graduate waiting to move when the economy goes into a growth phase again or whether you are seeking opportunities within your present job, there are a number of ways to bolster your resume for when the time is right. We believe that effective leaders and managers continue to develop their repertoire of skills throughout their careers, and that a significant part of this development occurs through practical experience. The more varied the practical experience, the greater the likelihood of developing a broad repertoire of skills.

Don’t waste time
Now is not the time to waste valuable energy watching your back, getting involved in the politics of the organization. Now is the time of taking action. It’s the time for more personal accountability, and taking control of your own career and delivering more than expected of you.

Here are the steps
Establish the opportunities to transfer into a new position at the same pay scale – but in a different area in the business – “the lateral career move”. Before following this strategy, the opportunity should be researched well to ensure that it will benefit your career but will also be enjoyable.

Seek help
A common trait of successful graduates is that none of them achieved their success on their own. Successful graduates seek the wisdom, knowledge and experience of other successful people. Mentors have never been more important than they are today as the traditional career paths have disappeared, and we often work in jobs that did not exist five years ago. Having a support group of quality mentors that you stay in touch with will provide direction through each phase of your development.

Brainstorming
Brainstorm ideas for career alternatives by discussing your core values and skills with your mentor, family, friends and networking. Listen to what they say – listening is an essential skill that builds important human relationships.

Investigate
Investigate educational opportunities that will bridge your background to your new field. This could be an in-company course or an evening course at a local college. Read as much as you can and reach out to personal contacts for an interview.

Identify
Identify freelance and volunteer activities related to your interests to test the validity of these. Many opportunities are not defined jobs at different levels; they are, rather, strategic projects. Establish what these are and make sure you volunteer for the project team closest to your interest.

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