Can you apply Warren Buffett’s style of stock market
investment to property investing?
investment to property investing?
Warren Buffett is one of the most successful investors of
all time and one of the richest men in the world with a net worth of $79
billion, most of which he intends giving away to good causes.
all time and one of the richest men in the world with a net worth of $79
billion, most of which he intends giving away to good causes.
He leads a relatively simple life in Omaha, Nebraska and has
lived in the same house since 1958.
lived in the same house since 1958.
Multi-billionaire Warren Buffett is a ‘value investor’ who
invests in companies for long term though Berkshire Hathaway, which has given
shareholders a remarkable average annual return 20% since 1965.
invests in companies for long term though Berkshire Hathaway, which has given
shareholders a remarkable average annual return 20% since 1965.
A single share in Berkshire now costs over $280,000.
He looks to buy companies at a price which gives him a ‘margin
of safety’. In other words, he only buys at below-market value and pays no
regard to the sticker price quoted on the stock market.
of safety’. In other words, he only buys at below-market value and pays no
regard to the sticker price quoted on the stock market.
“Price is what you pay. Value is what you get.”
Warren Buffett
He does not jump in and out of the market. Instead the wise
old ‘sage of Omaha’ patiently waits for the right deal. In fact, he has not
bought very much for the last two years and got out of all of his airline
investments during the last stock market fall.
old ‘sage of Omaha’ patiently waits for the right deal. In fact, he has not
bought very much for the last two years and got out of all of his airline
investments during the last stock market fall.
He does not just sit there and wait twiddling his thumbs. He
and his partner, Charlie Munger, spend their days researching companies and
studying balance sheets.
and his partner, Charlie Munger, spend their days researching companies and
studying balance sheets.
Still active at 89, he attracts a huge following among share
investors, such as Phil Town, and his shareholder meetings are more like a
convention.
investors, such as Phil Town, and his shareholder meetings are more like a
convention.
What type of companies does Warren Buffett buy?
Berkshire Hathaway is a holding company which owns
substantial stakes in insurance companies, banks and credit card companies like
Goldman Sachs, Bank of America, Wells Fargo and American Express, Visa,
Mastercard, transport companies and perennial businesses like Kraft Heinz,
Apple, Microsoft, Coca-Cola and McDonald’s.
substantial stakes in insurance companies, banks and credit card companies like
Goldman Sachs, Bank of America, Wells Fargo and American Express, Visa,
Mastercard, transport companies and perennial businesses like Kraft Heinz,
Apple, Microsoft, Coca-Cola and McDonald’s.
Businesses which some investors might find boring but all
have one thing in common.
have one thing in common.
A moat.
Having a moat protect the business from the competition that
would seek to attack and destroy the castle.
would seek to attack and destroy the castle.
A moat can consist of a strong brand, like Apple, McDonald’s
and Coca-Cola. It could also be that customers would find it extremely
difficult to switch to a competitor or even have no other choice.
and Coca-Cola. It could also be that customers would find it extremely
difficult to switch to a competitor or even have no other choice.
He buys strong companies with excellent earnings growth that
he would be to hold for the next 10 years “even if the market shut down”.
he would be to hold for the next 10 years “even if the market shut down”.
He does not jump into the latest tech firm and will not be putting
his cash into Bitcoin or cryptocurrencies, of which he once said, “In terms
of cryptocurrencies, generally, I can say with almost certainty that they will
come to a bad ending.”
his cash into Bitcoin or cryptocurrencies, of which he once said, “In terms
of cryptocurrencies, generally, I can say with almost certainty that they will
come to a bad ending.”
Berkshire owns and controls many businesses but does not run
them on a day-to-day basis. Their management style is hands off, as one of the
reasons they invested in the company was that it had a great management team
and board.
them on a day-to-day basis. Their management style is hands off, as one of the
reasons they invested in the company was that it had a great management team
and board.
Can you apply this investment philosophy to property?
Of course you can!
All property investors want to buy property at below market
value. However, very few take the time and trouble to keep researching the
market in order to find that special deal.
value. However, very few take the time and trouble to keep researching the
market in order to find that special deal.
“Never invest in a business you cannot understand.”
Warren Buffett
Warren always does his homework and knows his business
inside out. He has spent years learning to become a great investor and studied
under the likes of Ben Graham, the father of value investing who made a fortune
during America’s great depression.
inside out. He has spent years learning to become a great investor and studied
under the likes of Ben Graham, the father of value investing who made a fortune
during America’s great depression.
Finding the right property, in the right area at the right
price gives an investor an excellent prospect of good long-term earnings -
massive upside with very little downside.
price gives an investor an excellent prospect of good long-term earnings -
massive upside with very little downside.
“Buy a stock the way you would buy a house. Understand
and like it such that you’d be content to own it in the absence of any market.”
and like it such that you’d be content to own it in the absence of any market.”
Warren Buffett
Another aspect of Warren’s investment philosophy is to never
lose money. His two golden rules are:
lose money. His two golden rules are:
“Rule No. 1: Never lose money. Rule No. 2: Never
forget rule No.1”
forget rule No.1”
This might sound strange for someone investing in a volatile
ad sometimes risky stock market, but not if you apply his philosophy of buying
companies with a margin of safety in the price and a strong moat.
ad sometimes risky stock market, but not if you apply his philosophy of buying
companies with a margin of safety in the price and a strong moat.
Warren Buffett has come up with many brilliant quotes.
Perhaps one of his most famous is:
Perhaps one of his most famous is:
“We simply attempt to be fearful when others are
greedy and to be greedy only when others are fearful.”
greedy and to be greedy only when others are fearful.”
Applying Buffett’s investment philosophy in the stock market
or property investment will ensure you make money and build wealth for the
longer term without risking the farm on every deal.
or property investment will ensure you make money and build wealth for the
longer term without risking the farm on every deal.
By Charles Kelly, Property Investor, Author of Yes, Money
Can Buy You Happiness and creator of Money Tips Podcast.
Can Buy You Happiness and creator of Money Tips Podcast.
There are more examples and practical
steps to getting rich and being happy in my book, Yes, money can buy happiness, I cover the 3
R’s of Money Management, the Money B.E.L.I.E.F System and much more. Check it
out on Amazon http://bit.ly/2MoneyBook.
steps to getting rich and being happy in my book, Yes, money can buy happiness, I cover the 3
R’s of Money Management, the Money B.E.L.I.E.F System and much more. Check it
out on Amazon http://bit.ly/2MoneyBook.
If you’d like further information on how to survive the
crisis and even quit the rat race, email me at Charles@CharlesKelly.net
or send me a message through Facebook or my Money Tips Daily community. See
more articles at www.moneytipsdaily.com
crisis and even quit the rat race, email me at Charles@CharlesKelly.net
or send me a message through Facebook or my Money Tips Daily community. See
more articles at www.moneytipsdaily.com
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