A must watch for beginners, the basics of investing explained by the best!
"When you buy a stock, plan to hold it forever"
"Diversification can be dangerous"
"most news is noise and not news"
"The best moves are usually boring"
"low cost index funds are sensible for most investors"
"only listen to those you know and trust"
You are simply buying pieces of businesses, change your mindset.
A stock is simply a piece of a business, start thinking about stocks as ways of voting on which businesses will succeed in the future and the stock market is a simple mechanic for pricing those strategies. Unfortunately the stock market is often wrong in the way in which it prices businesses. This opens up opportunities to find businesses whch will have strong future success and also be purchased at prices which are attractive due to the market not correctly pricing these businesses.
What is a company worth?
A company is simply worth: the amount of cash flow the business will produce in the future discounted back at the correct interest rate to our time. Warren Buffett has made this clear and a companies value lies in what the company can give you back after you've invested a principal amount. The companies value can also be found within it's assets and earnings, the better the business is at using it's assets- the greater the value of the company. In addition to this the business must offer the buyiner a margin of safety to be considered a value investment, the margin of safety is simply the difference in the price of the company and it's true worth upon thorough analysis.
Who is investing in the stock market for?
Investing in the stock market is for those who are seeking to purchase pieces of businesses and wish to have flexibility in owning the asset. Stocks are liquid assets, they are easy to buy and sell- this gives you flexibility in your investing. Stock market investing is for those who are patient and can hold a stock for a minimum of 10 years before expecting the business to give a decent return. The stock market is for the patient and wise, those who are purely rational in selecting stocks and also have the temperement to hold onto the stock during down times in the market.
What does it take to beat the market?
Warren Buffett has made it clear that you are your biggest enemy when it comes to investing, you have to not get in your own way and that alone is the key to success in investing. Not getting in your own way and managing yourself the right way, in order to stay patient in times of volatility and to stay emotionally stable, always remember that: you have to stick to your reasoning for the long term and being in it for the long term. To do well in the markets, you have to have patience, emotional discipline and to be able to think independently about potential investment decisions.