Some more from the world's greatest Investor

Today let us look into some other qualities of great investors. Buffett had learnt from his teacher Benjamin Graham that "You don't have to do extraordinary things to achieve extraordinary results". Remember his simple strategies have led to his extraordinary success. Investing is not a game where a guy with 160 IQ can beat a guy with 130 IQ. Rather successful investing is something that can be achieved with a little more than basic knowledge, fundamentals and common sense. Let us look into some of these that have been followed by Mr. Buffett over his lifetime.

        1. Patience

Think 10 years rather than 10 minutes. If you aren't prepared to hold a stock for a decade, don't buy it in the first place. Be a decade's trader rather than a day trader. Value investing has been a proven get-rich-slow technique. Stock market is a relocation center where money flows from the impatient to the patient. Well if you don't believe then name one such day trader who has turned $10 Mn into $ 1 Bn. Patience is required for value investing. Charlie Munger says "Investing is where you find some great companies and then sit on your ass". Well all this seems to be really easy and simple, but the fact is it is not so easy to be patient, specially amidst all the people around you act irrationally. So the mental exercise which is practiced by Buffett is that buy a stock and then assume that the market has been closed from the next day for a 5 year holiday. 

Buffett has owned a large block of Berkshire Hathaway for over 5 decades and has not sold a single share. Another reason why Buffett has been able to turn $10 Mn Washington Post investment into a 1 Bn stake was because he held on to those shares for dear life. Right after his purchase in 1973, the shares slumped 50% but he refused to sell a single share, he had a bigger picture in his mind. For him the stock was volatile but the business wasn't, the business was really stable. His patience has been richly rewarded. Many things- good and bad are going to happen while you are a shareholder, The stock market will overheat and the prices will rise, the bears will close in and the prices will plunge, the important thing is to be in the right business and cultivate the right attitude. Remember time is a friend of a wonderful business and an enemy of a mediocre.

What do we learn : Do not check your investments everyday or week, remember that all stocks go up and down. A better use of your time would be to keep an eye on business performance rather than on price performance.

Tip: If the question is "How long will you wait?", Buffett's answer is "If we're in the right Business, We'll wait indefinitely"

        2. Look at stocks as ownership interest

Once you get into the right business, you can let everyone else worry about the stock market. The stock is nothing but a representation of your share in the ownership of the company. When you think about your portfolio what should come to your mind is not Moneycontrol, tickers or tables in the dalal street journal. What should come to the mind is the business or a collection of Businesses-real enterprises engaged in the right businesses. It's not about playing the market, it's about buying the business. If a business does well the stock eventually follows. The most important thing that you can do before buying a business is write down on a piece of paper the reasons why you will pay these many Rupees for a particular business, If you can't write down the reasons, don't buy it. During the days of dot com bubble, the high-tech stocks were going up exponentially. Investors were buying the stocks on price action rather than on the quality of the business that stock represented. Buffett did not buy a single internet stock as he was not able to see a predictable future of these companies. 

1999 was the worst year for the "price" of Berkshire Hathaway, the stock had plummeted to $ 40,000 a share from a previous high of $ 84,000 a share. Buffett was criticized and laughed upon by the market pundits for missing the bus. Buffett still refused to buy the business that he does not understand. Buy businesses that have stayed for 50 years and will stay probably for 50 years more. Businesses that don't change much are the one's that Buffett likes. Wrigley's chewing gum will not change 10 years down the line from what it is doing now. These are the businesses that Buffett likes to invest in. These are the business that become more predictable. 

What do we learn: Don't think about the stock in the short term. Think about Business in the long term. Investing is never emotional, it is more business-like.