1. Consider probabilities: Warren Buffett is a fan of the card game Bridge, in which successful players beat their opponents by considering probabilities. Likewise, you can think of stocks in terms of probabilities. The Investopedia article points out that investors who consider the probability of a good return over 10 years is likely to ride out down cycles to find success in the long-term.
2. Realize that investing has psychological aspects: We would like to be unemotional in our investments, but instead, it is better to look at how you approach investing from a psychological standpoint, and then find a mindset that works for you.
3. Don’t pay attention to market forecasts: No one can truly predict the market. Buffett points out that investors should instead pay attention to the fundamentals of their investments, and choose those that will do well over the long term. These will likely ride out down markets, and do well during bull markets.
4. Wait for the good investments: Instead of investing in a bunch of mediocre companies, Warren Buffett suggests that you think as though you only have around 20 investment choices for your lifetime portfolio. This way, you will carefully choose what is most likely to work well for you over a lifetime.

As you can see, there is a lot of potential for making good decisions and thinking in a way that will help you see long-term success with your portfolio. But it requires research and discipline.

Image source: Ethan Bloch via Flickr

Post from: EveryJoe

8 Tips for Thinking Like Buffett, Part 2

Lucky for us, Investopedia took eight valuable tips from the book The Warren Buffett Portfolio and offers them to the world. Here are the first 4 of the 8 tips for thinking like Warren Buffett as you make investing decisions:

1. Consider stocks a business: Instead of looking at stocks as part of a game, look at is as a business. Buffett says that if people considered themselves “part owners” of the companies they invest in, they would make more deliberate choices and think things through.
2. Make larger investments: Buffett believes that if you do your homework, and make careful decisions, you can choose solid, fundamentally strong companies that you should feel comfortable putting more money into. Yes, you want some diversification. But Buffett feels there’s such a thing as too much of a good thing.
3. Reduce turnover in your portfolio: Constant buying and selling and trying to time things to “make it big” can result in missed growth, as well as adding up the transaction fees that eat into returns.
4. Don’t rely only on stock prices: Buffett looks at the fundamentals of a company, and its potential growth, before making a decision. If you choose a good investment, the stock price will eventually take care of itself.

Tomorrow we will look at the remaining four tips for investing like Warren Buffet.

Image source: Mark Hirschey via Wikimedia Commons

Post from: EveryJoe

8 Tips for Thinking Like Buffett, Part 1

Be warned: The New Savage Number is not for the faint of heart. Savage is well-known for her investment savvy, and as the first woman trader on the Chicago Board Options Exchange (as well as being a founding member of that exchange). Her book includes numbers and even Monte Carlo modeling. However, she addresses how the numbers and modeling work, and renders them understandable. But sometimes it makes for heavier reading.

Overall, though, The New Savage Number is a comprehensive look at how you can figure out how much money you need for retirement, and develop a plan to meet your goals and needs. The book starts out by looking at the reality of retirement, and addressing the relationship between time and money. There is also a chapter on key questions you need to answer about your retirement, and possible life expectancy.

Savage then shows you how to use Monte Carlo modeling to help you plan your retirement, and looks at how you can create a portfolio of investments to grow your retirement funds, as well as how much you can realistically expect from Social Security. The New Savage Number also addresses long term coverage, and how to get the protection you need, as well as estate planning.

Bottom line: The book may seem a little intimidating at first, but Savage takes you through what you need to know, and helps you plan out a route to a retirement that you can depend on.

Post from: EveryJoe

Book Review: The New Savage Number

Online video ad revenue is on the rise, and big players are spending big bucks to get in on the ground floor. Google buying YouTube for $1.65 billion was only the beginning. Michael Learmonth estimates that online video investments over the last three years have hit $8 billion.

Before anybody starts talking about a bubble, note that Meryll Lynch wrote off $9 billion in bad mortgages in the first quarter of 2008 alone. If there is a crash coming, it sure as Hell isn’t in tech.

Post from: EveryJoe

Online Video Investments Hit $8 Billion