Learn to invest with Buffett

Chapter 107

No.17 Chapter 6 Ten Principles of Stock Market Investment
Successful investing depends less on IQ than on self-discipline.

--Warren Buffett
Over the past decade or so, due to the short history of China's stock market and lack of experience, the market environment has been harsh, investors have suffered numerous losses, and investment confidence has suffered a severe setback.Since the second half of 2006, China's stock market has ushered in a new round of bull market, and the stock market has attracted more and more attention from all walks of life, so more and more new investors have poured into the stock market.For new investors who have just entered the market, we might as well learn from Buffett's value investment strategy.Learn some investment knowledge in advance to prepare for future investment.

1. Simulate operations before investing
It is best for new investors to carry out simulated operations for a period of time to familiarize themselves with the market environment without any risk.The mastery of investment skills by new investors certainly needs to be achieved through learning, but the understanding of investment concepts still needs to be completed through practice.After investors have learned certain investment skills, they also need to conduct a large number of simulation operations to hone the theoretical skills they have learned.Simulated operation is low-cost and risk-free compared with real offer operation, and it is also easier to master than real offer operation, because during simulated operation, investors' mentality can be kept in the best state.

If you can't even do the simulation operation well, investors should try not to jump into the sea of ​​stocks casually to surf, so as not to be swallowed by the rough waves.Even if you enter the later stage of firm offer operation, try to keep a small number of stock selections, preferably only one or two.It is necessary to maintain long-term follow-up observation and simulation operations on the selected stocks, so that you are very familiar with the stock properties of individual stocks, and can sensitively predict the short-term trend of the stock, so as to lay a solid foundation for your accurate and quick attack.

2. Don't be too greedy
Investors hope to make money in the stock market, but they should not be greedy, greedy, or impatient.If investors do not love money, they will lack the motivation they deserve; if they love money too much, they may fail.Investors must be more interested in the investment process than in the outcome of the investment - the money.

3. Learn to understand corporate financial statements
Financial reporting is flexible enough to allow dishonest business owners to exploit it.If you don't know how to analyze financial statements, you shouldn't invest in stocks.

When analyzing a business, imagine that you are the owner of the business and that the business is your only means of earning a living.At this time, you will naturally care about who your competitors are, who your customers are, and what are your strengths and weaknesses.You naturally ask yourself what to do and what to worry about.You go out and do some research.As a result, you will know more about the business than the managers.The information you get can help you make the right judgment.

4. Don’t set unattainable investment goals

The time for new investors to enter the stock market is usually concentrated in the late stage of the bull market, because at this time a large number of old investors have obtained some investment income, and the wealth effect of making money strongly stimulates the willingness of new investors to enter the market.Therefore, new investors often enter the stock market at the end of the bull market, when the market is often more active, and new investors are cautious, and immediately cash out any profits.During this period, although the amount of profit made by new investors is not large, the profit probability can even exceed that of old investors. Some new investors have the idea of ​​despising the stock market because of this, thinking that the stock market is easy to make money.As a result, they will set target profits that do not conform to the actual situation of the market. When the market turns into a weak market, they will operate against the market in order to achieve the original target regardless of the actual situation, and often suffer heavy losses as a result.

5. Do not invest in debt

Under normal circumstances, the vast majority of investors will not go bankrupt because of stock speculation. If investors enter the market with their own funds, even if they encounter the most terrifying decline, they will not lose all their principal.However, borrowing is different. While multiplying the investment income, it also doubles the risk.Borrowing will also increase the psychological pressure of investors, seriously unbalance the psychological balance of investors, and easily lead to deviations in analysis and mistakes in decision-making.It is also easy to cause investors to go bankrupt by borrowing money to speculate in stocks.

6. Be risk aware
Before entering the market, new investors often hear old investors bragging about how to easily obtain great results in the stock market. They don’t know that many old investors often report good news but not bad ones for the sake of face. After a long time, there will always be some brilliant achievements.New investors don't understand the actual situation, thinking that the stock market is a cornucopia, and if you put in a seed, you can grow a cash cow.Therefore, they often enter the stock market with the dream of making a fortune on the basis of lack of objective understanding of the risks in the stock market. For investors who hope to become winners in the stock market, the stock market is full of opportunities and traps. Be more risk aware and less blind.

7. Invest rationally

Buffett often reminds investors that the premise of investment is that the enterprise must have value.Therefore, investors need to determine how much the company is worth, and then decide how much each stock is worth, and then decide whether to buy it or not.Don't speculate on the movement of the stock price. As long as the company is really valuable and the stock price is cheap, you don't have to worry about it after you buy it, even if the stock market is closed for a few years.

Some investors are very active, and they itch all over when they hear any news.But buying and selling too frequently can do more harm than good.If the stock market is too hot and the stock price is too high, investors should wait until the stock market cools down.Moreover, we cannot wait for a long time to change the standard.

8. Don’t trust gossip
Policies and news in China's stock market are indeed one of the important factors that determine the stock price trend. Although the use of insider information to speculate in stocks is strictly prohibited by law, investors can often see that many stocks have soared before the announcement of good news, and the phenomenon of leaks is obvious.However, the spread of news is inversely proportional to the effectiveness of the news. News that even ordinary retail investors know is often useless, and some news is even a smoke screen released by the dealer to cover up the nature of its shipments.

New investors have just entered the stock market and lack the experience and skills to make long-term stable profits. They often pin their hopes of making profits on gossip. Without the ability to dialectically analyze the news, they can easily fall into the trap of news.

9. Be confident
In investing, you must honestly admit what you know and what you don't know.Don't invest in companies you don't understand.Even if the stock price is cheap, if you don't understand or like the company, don't invest.If you think you buy a stock that you don't want to keep, and expect to sell it to someone who is stupider than you in proportion, you will often suffer yourself.

10. Don't have a gambling mentality

New investors are weak in the ability to study and judge the market in the stock market, and at the same time they are eager to make money. They invest money and trade without researching the latest stock market.When you sell, you are always worried that the stock market will rise sharply, and when you buy, you are worried that the stock market will fall.When you have a short position, you are afraid of running out of space, and when you are full, you are afraid of getting stuck.Such new investors do not have a clear understanding of the current market environment and future development trends of the stock market. Rather than saying that they are speculating in stocks, it is better to say that they are gambling, and losses are an inevitable result for them.

In short, new investors must establish risk awareness when investing, do your homework before investing, and learn Buffett's investment principles in your spare time to make full investment preparations.

Investment motto:

Investors use the theories they are most familiar with and invest in the stocks they are most familiar with in the market they are most familiar with. This is the easiest way to make profits.

(End of this chapter)