Buy Stocks When Others are Fleeing

"Berkshire buys when the lemmings are heading the other way."

Warren Buffett

Valuation Is and Art and Science

"Valuing a business is part art and part science."

Warren Buffett

Why Stock Markets Have More Day Traders than Value Investors?

Actual Question:

Why does there seem to be so many more day traders than value investors in the style of Warren Buffett, etc.?

Answer:

Dear Friend!

Such a wonderful question!

I too wonder the same.

In my opinion there are three fundamental reasons for the gross aberration that there are more day traders than value investors operating in the stock market.

Greed:

Greed and fear are the most common and difficult to control human emotions. Of the two greed comes first and fear follows. When markets are rising (present situation) greed attracts more players. Most of the people enter not knowing anything about stock markets. They have simply overheard somebody saying that markets are rising and there is a killing waiting out there!

Desire for making a quick-buck:

Many people have a strong desire to make a fast-buck. They do not want a longer but surer path like value investing. This fundamental nature of human beings is further reinforced by modern technology, which strives to provide instant gratification of needs - people just don’t want to wait anymore - they want internet banking, immediate downloads, and so on. Marketers, online shops, et al, work hard to satisfy this craving for instant gratification.

Gambling Instinct:

Man seems to have been created with an inborn gambling instinct. This is not new. We have been having it since the Mahabharat times, with the Pandavas betting and losing even their beloved wife in fit of gambling rage.

Day trading provides a very convenient dignity to what is otherwise pure gambling. Families of day traders honestly believe that day traders are engaged in serious and respectable business or profession, and they spread this belief about their day trading family members among the larger family and the society at large.

Related:

• Trading/ Day Trading
• Margin Trading
• What is Short Selling?
• What is the Differences Between Fundamental and Technical Analysis?
• Why Day Traders Cannot Quit?
• Is Algorithms Based Trading Safe?
• How Warren Buffett Trades in Stocks?

Conclusion:

Finally, my dear friend, please do not think I am delivering this sermon standing tall from a high moral ground.

I had been once what I have described above, till one day I lost all my life’s savings in the fraction of a second during a market meltdown.

After this costly burning of fingers, I had abandoned the stock markets for a very, very longtime.

Fate touched me and made a value investor after a long interlude.

I too am striving my bit through my blog ‘Wealth Vidya’ to convert day traders into value investors, but cannot fail to wonder, just like you, why there are more day traders than value investors operating in the markets today!

Thank you,

With Best Regard,

Anand

Forecasts Fill Ears but Not Wallets

"Market forecasters will fill your ear but never fill your wallet."

Warren Buffett

Stock Market is Only to See If Anybody is Acting Foolish

"The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses."

Warren Buffett

Greed Fear and Folly in Sock Market

"The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predictable."

Warren Buffett

Warren Buffett on Economi Cycles Video

Duration:	0:2:50
Producer:	Georgetown University
Audience:	Students of Georgetown University
Participants:	1.     Warren Buffett 2.     Briyan Moynihan, CEO, Bank of America
Year:	September 27, 2013
Description:	Noted businessman, investor and philanthropist Warren Buffett joined Bank of America CEO Brian Moynihan in Gaston Hall at Georgetown.

Warren Buffet's Wait for the Right Pitch Advice Video

Related:

• Wait for Your Pitch Quote

Warren Buffett Interview 1 2017

Does Warren Buffett Make Money on the Stock Market?

Picture Shows Electronic Display Board of the New York Stock Exchange

"I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years"

Warren Buffett

These beautiful words from Warren Buffett, Chairman, Berkshire Hathaway, are worth setting on stone are the guide post to aspiring value-investors.

Legendary investors do not invest in a hundred stocks with an objective of making a short/ medium term gain from the price the price rise. They make lifetime investment in best businesses like Gillette and Coca-Cola and simply forget the investments.

On the contrary ordinary mortals like me are tempted to sell the investments from the prise rise. Today, after a month I opened the online stock broking account to prepare for February 2017 investment, and found that our academic collection 'Portfolio 2K15' had appreciated 40% in less than two years. There is an irresistible temptation to liquidate the portfolio and en-cash the clear profit of Rs.200,000 on the cost of investment of Rs.480,000. 

Why should the portfolio be not liquidated? Why not make the significant profit and put the proceeds in a bank fixed deposit?

The answer is that this portfolio if  left untouched for the next 30 years and continue the self developed systematic investment plan (SIP) of Rs.10,000 every month, the portfolio could grow to the size of Rs.80 millions (Rs.8 Crores or US$ 1.20 millions).

Therefore, like Warren Buffett's Bershire Hathaway, budding value-investors everywhere should make investments considering that the stock markets are going to close tomorrow and remain closed for the next five or ten years - not to en-cash the handsome but in reality tiny gains made in two to three years.

Picture shows Warren Buffett and conceptualises his Inspirational Quotes

Market Fluctuations Are Investor's Friend

Picture Depicts Markets Fluctuating Like a Pendulum Between Enthusiasm and Pessimism

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

Warren Buffett

In these golden words Warren Buffett, Chairman of Berkshire Hathaway is advising investors to consider market fluctuations in the form of ups and slides as a friend rather than an enemy.

Why?

Without market fluctuations - extreme once in a decade - extraordinary gains cannot be obtained. In the absence of market fluctuations there is no scope for capital appreciation. Stocks too will be bland like fixed deposits in a bank.

This is the first part.

The second part is to profit from the folly (of others) than participate in it.

What does this mean?

Buy stocks at or below their intrinsic value - not at their market peaks.

Innocent investors make the folly of entering the market when it is at its peak and buy shares at extremely high and unjustified prices. When the price slides or steeply corrects they panic and sell the investment at a loss. This is the folly Warren Buffett the Chairman of Berkshire Hathaway is advising not to participate in.

But how to profit from the folly?

Buy the shares of excellent companies at throw away prices when they are being dumped by others in panic.

In conclusion fluctuations are natural and inherent to markets. Capital appreciation or wealth creation takes place only on account of market fluctuations. My guru Warren Buffet, the siren of Omaha and Chairman of Berkshire Hathaway is advising investors to consider market fluctuations in the form of ups and slides as a friend rather than an enemy and to profit from and not participate in them.

Warren Buffett the Siren from Omaha

You Can Become the Richest Investor - Video

Warren Buffett Biography - Documentary - Video

Warren Buffett's Best Advice on Successful Investing

Can We Achieve Warren Buffett Like Success?

Every humble value investor can achieve Buffett like success even today, in the altered scenario. The magnitude may not exactly match Buffett’s but the success could be equally significant and life changing. These are not my words. Buffett himself is proclaiming them from the rooftop of every forum.

In order to substantiate the statement that everyone of can do well as investors we have to analyse the principles of investing over which the edifice of investing success is built. These are:

Extraordinary Intelligence is not required:

Investing success does not require extraordinary intelligence. What it requires is a sound frame of mind, patience and discipline. It is about character and right attitude.

Never to lose money:

Buffet prescribes only two rules. “Rule No.1: Never lose money. Rule No.2: Don’t forget Rule No.1.”

When Buffett advises not to lose money, what is he meaning? He is talking about losing money, he is talking about dangerously speculative acts performed under the misunderstood guise of investing; day trading and margin trading.

He is warning against dabbling in stocks without prior knowledge when he says "Risk comes from not knowing what we are doing." For those who cannot afford to learn investing, he is advising them to invest in well diversified index funds.

A very long time is required:

The real secret behind investing success is the long time required. Only over very, very long timeframes does the miracle of compounding get an opportunity to wave its magic wand. There are absolutely no shortcuts. Buffett himself says that in life certain things take time and we cannot change them. He says"You cannot get a baby in one month by making nine women pregnant." 

To lead a simple life:

Leading a simple life and controlling the urge to splurge will put more extra cash in the hands which can be channelised into investments and compounding. Buffett says that those who understand what extraordinary compounding results can be produced even from humble sums of money will hesitate to throwaway a single dollar.

Mastering greed and fear:

Greed and fear are the two worst enemies of investors. Exorcising these twin ghosts through true knowledge is an essential ingredient of investing success.

Having identified and understood the founding principles behind investing success, we can safely conclude that everyone of us can replicate Buffett's achievement safely through lifetime investments.