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Health & Fitness

Buffet's 3 Rules

Warren Buffet is considered one of the most successful value investors of all time, especially in the realm of value investing. Value investing, in essence, is purchasing shares of companies when they are “on sale,” holding them for the long term, and benefitting from the increasing earnings potential going forward. This concept is easier said than done, obviously. Warren Buffet issues letters to the shareholders annually that outline the performance of Berkshire Hathaway’s (the firm he founded), investing strategies, and tidbits about investing overall.

Value investing as stated above, focuses on purchasing shares of firms when they are “on sale,” and holding onto them for the long term.

With all of the market chatter surrounding the market recently, it can be very difficult to objectively analyze market conditions and how these impact the firms you are interested in purchasing. With news of unrest in Ukraine, the lack of growth in the developed world, the struggles of emerging markets, the Fed tapering, polar vortexes, and the partisan debate that is engulfing much of politics worldwide, it can be very difficult to lock into the underlying trends and block out this “noise.”

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A Fresh Pair of Eyes, in a very similar vein to Warren Buffet (but not explicitly focused on investing) operates in a similar manner. Drill down to the bedrock of the issues and analyze the situation objectively, logically, and analytically. With that being said, let’s look at Warren Buffet’s (3) three rules for investing.

1) Purchase assets after a downward shock in price
2) Purchase assets because you believe in their future earnings potential
3) Ignore the chatter

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