Buffettology - Secrets of Warren Buffett

Buffettology is written about the greatest stock market investor of our time, Warren Buffett.This book is written by Mary Buffett who was Warren Buffett's daughter-in-law for 12 years and wrote this book after her divorce from Warren's son Peter.In this book Mary has revealed the investing style and techniques that have made Warren Buffett the World's most famous and richest stock market investor.The Book is divided in 2 parts:1. The Art of Basic Buffettology2. Advanced BuffettologyWho Is The Greatest Investor?Warren is the only billionaire who has made it to the Forbes list of the four hundred Richest Americans, solely by investing in the stock market. Over the last thirty-two years his investment portfolio has produced an average annual compounding rate of return of 23.8%. Currently he has net worth of $ 50 billion.What Is Business Like Investing?Warren Buffett has accumulated $ 50 billion by investing in the stock market. He prefers to acquire 100% ownership of the company
that has excellent economics and management. If he likes any company, he waits for the exact time to buy the shares of that company.He invests in different businesses with the long-term prospective. He tries to figure out the projected annual compounding rate of return the investment will produce in the next 10 or 20 years.If he likes any company, he invests a lot of time to figure out at what price he want to buy the stocks of that particular company and how much interest rate he will get in the long-term.He does not invest his money in the businesses he does not understand well. He reads the earning reports and balance sheets of hundreds of companies before choosing one. He invests only in the businesses whose future earnings are predictable.Some Lessons Learned From Warren BuffettWarren Buffet is not like other typical wall street investors who look at the daily prices of the different stocks to time the market.He does not like spending his time by looking at the charts
instead he reads the income statements and balance sheets of different companies.If anybody tries to give a stock tip, he does not show any interest in him. He likes to find out good stocks by his own research instead of investing his money on others stock tips.Warren likes to have concentrated portfolio where top 3 or 4 stocks have more than 70% of the total amount of the portfolio. He doesn't like diversifying. According to Warren diversification is something people use to protect themselves from their ignorance of stock investing.According to Warren, a $1,500 per share stock may be cheaper than a $2 stock if $1,500 stock is growing faster and selling on a lower price to earning ratio. You need to learn accounting to know about it.He finds good stocks and then waits for the market to go down so that he can invest his money in those stocks when they are selling on bargain prices thus he can accumulate more shares.The price that you pay to buy the stocks determines the rate
of return you will get. You should buy good stocks only when they are selling at low price to earning ratios. Even if you buy the best stocks your rate of return will be lower if you buy them at their peak.Warren does not like selling his stocks. If stocks are performing well you should not sell them because when you sell stocks on profit, you have to pay capital gain taxes.Whenever the stock market goes down instead of selling shares like most of the investors do, he just acquires more shares of his well performing companies.He buys the shares of those companies who can give at least 15% annual compound return on the invested money. Typical investor buy stocks in hopes of a 25% return in next six months and thus they lose the most of their money.Instead of buying stocks when the market is going up and all the investors are buying, he waits for the right time and right price to buy that stock usually when the market goes in the correction mode (down 10% to 15%).He calculates
his rate of return by dividing the company's annual net per share earnings by the price he pays for the stock. A $10 per share company's stock earning $2 equates to a rate of return of 20%.Warren is also willing to hold a stock forever as long as the economics of the business remain at least the same as when he bought it. This ensures that he will benefit from the compounding effect of retained earnings.The Greatest secret of Warren's success is getting at least 20% annual compounding rate of return by buying good companies at bargain prices when the market is in correction mode(down 10% to 15%) and then never selling well performing stocks to avoid the capital gain taxes.If you invest $100,000 in Warren Buffet type investment that is compounding at 20% per year, after 10 years your $100,000 would become $600,000. Stretch the time period out for thirty years, and your $100,00 will have compounded to more than $27,000,000.Warren buffet tries to save as much money as he can a
nd invest that money to get at least 20% annual compound return.He doesn't spend much money on buying expensive cars because he knows that by buying less expensive car he can easily save $20,000 and if he gets 23% annual compound rate of return on this investments, his $20,000 will be worth $158,519 after 10 years and $9,958,257 in 30 years.He doesn't panic when his stock prices go down, he just concentrate on the economics of the business. He knows that if his companies will release better earnings reports the stock prices will eventually go up.Final Thoughts On This BookIn this book Mary Buffett has explained really well about the secrets of Warren Buffet. It is must read book for you if want to invest in stock market and get 20% or better compounding rate of return on your money. If you are interested to become successful in stock investing then you must buy this and read it more than one time.About the Author

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