Discover Chris Rowe’s Internal Strength System- the ultimate stock trading course that can make your rich in 2010! Watch these Triple Threat FX- Trading Psychology FREE Video Series that reveal the secrets of making millions in trading. Take your Options Trading to the next level with the Live Trading Labs. Warren Buffet is among the richest persons in the world. Yet, he lives a simple life. He loves to work at this age even. Warren Buffet maybe one of the most successful investors of the 20th century. At one time, his net worth was more than $50 Billion. One day, he astonished the world by donating a large part of this legacy to Bill Gates another billionaire and the world reknowned software developer for helping the poor people in the developing countries.
No doubt, everyone calls Warren Buffet as the, “Sage of Omaha.” Now, let’s talk about Warren Buffet’s investing style. Warren Buffet read the famous seminal treatise on investing, “The Intelligent Investor” by Benjamin Graham while still in his teens. He was already investing in stocks at that age. He became a perfect disciple of the Ben Graham. Initially he worked with him and learned a lot from him.
In those days in early 1950s, the concept of calculating the intrinic value of the stock was novel. No one was using that concept or ever thought of how to calculate it. Warren Buffet took this simple idea and started applying it in practice.
He would calculate the intrinsic value of a stock or a business and see if the stock was selling above that value or below that value. If the stock was selling above that value, he would conclude that it is overvalued. If it was selling below that value that meant the stock was undervalued by the market and would eventaully reach its inherent intrinic price. Warren Buffet started investing in such stocks.
Now, Warren Buffet is a perfect example of a buy and hold investor who does meticulous research while selecting the stock for investment. He says that you are not investing in a stock but investing in a business. Investing in a stock is like owning part of that business. This makes perfect sense. So when you invest in a stock, you want to see that business grow so that the stock also becomes more valuable.
Warren Buffet is a value bargain hunter. Sometimes, he found a business to be attractive but high priced at that moment. So, he would bid his time and wait for that time when the market is down and there is some possibility of investing in that stock at bargain prices. Warren Buffet has consistently beaten the market with an annualized rate of return of around 22% as compared to that of 11-14% offered by investing in passive S&P mutual funds.
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