The following is an excerpt of Warren Buffet Investment Diary. It contains 38 Golden Rules to investments that he lives by and these are the very same rules containes in the all time classic investment book "The Intelligent Investor" written by his mentor Benjamin Graham.
Here are the rules!
1. Never Lose Money.
2. Never forget rule No. 1.
3. Never invest in a business you cannot understand.
4. Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in stock market.
5. Critical Factor - Determine the intrinsic value of business and pay a fair bargain price.
6. Risk - assuming you know what you are doing,you can reduce your risk by concentrating on only a few holdings.
7. An Investor should hold a small piece of business with the same tenacity that an owner would exhibit if he owned all of the business.
8. Buy a business, don't rent stocks.
9. Ask yourself : Does the business have a consistent operating history?
10. An investor needs to do very few things as long as he/she avoids big mistakes.
11. "Turn-arounds" seldom turns.
12. Focus on Return on Equity(ROE) not on Earning per share(EPS).
13. Look for company with high profit margin.
14. Always invest for the long term.
15. Ask yourself : Does the business have favorable long term prospects.
16. Remember! Stocks market is manic depressive.
17. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
18. The dumest reason in the world to buy stock is because it's going up.
19. Most people get interested in stocks when everyone is. The time to get interested is when no one else is. You can't buy what is popular and do well.
20. I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out.
21. Our favourite holding period is forever.
22. Risk comes from not knowing what you're doing.
23. If you don't know jewellery, know the jeweller.
24. If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.
25. If a business does well, the stock eventually follows.
26. A public opinion poll is not substitute for thought.
27. The most important quality for an investor is temperment, not intellect...You need a temprement that nither derives great pleasure from being with the crowd nor against the crowd.
28. When asked how to become successful in investing, Buffet answered : "We read hundred and hundreds of annual reports every year.
29. I never buy anything unless I can fill out on a piece of paper my reasons...
30. I will tell you how to become rich. Close the door. "Be fearful when others are greedy. Be greedy when others are fearful.
31. If you understood a business perfectly and the future of the business, you would need very little in way of a margine of safety.
32. So, the more vanurable the business is, assuming you still want to invest, the larger merine of safety you need.
33. The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all the durability of that advantage.
34. Investor should remember that excitment and expenses are their enemies.
35. The most common cause of low prices is pessimism, sometimes pervasive, sometimes specific to a company or industry. It's optimism that is the enemy of a rational buyer.
36. Diversification is a protection against ignorance. It makes very little sense for thoes who know what their doing.
37. A low cost index fund is the most sensible equity investment for the great majority of investors. My mentor Ben Graham took this position many years ago and everyting I have seen since convinces me of it's truth.
38. By periodically investing in an index fund the know nothing investor can actually out perform most investment professionals.
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