In stock market two approaches prevail: technical and fundamental. I want to result endurance from the book “New Buffetology” where is described the secret of the greatest investor in the world which has managed to transform initial 105 thousand dollars in 30 with superfluous billions – only for the investment account into securities.
Here its big secret: Warren Buffet has saved up the huge fortune, without speculating on the Stock Exchange, but trading with people and the organizations which speculate on the Stock Exchange. Warren extremely skillfully exploits pessimism and short-sightedness of other investors.
You see in the majority of people and the financial organizations (type of mutual funds) speculate on the Stock Exchange in aspiration to fast profit. They pursue fast and easy money and thereof and to investment philosophy short-sightedness are inherent in their investment methods. Warren considers that this short-sightedness sooner or later lead to misses of huge scales.
And when these misses happen, investors stumble and patiently waiting having at the order billions of dollars in assets with readiness buy the selected companies of which the majority of mutual funds and individual investors desperately try to get rid of. He buys without fear because knows that today’s pariahs of stock exchange will be desired tomorrow for all.
Warren is able to do it better than others because he has found out two things which very few investors are capable to estimate on advantage only. First, approximately 95 % of private investors and the investment institutes which are speculating on the Stock Exchange are movable by “short-term motivation”. It means that they react to short-term incentive stimulus.
Today they buy papers, having heard good news about the company and tomorrow sell them reacting to the bad news, long-term economic situation of the company – the classical gregarious mentality sensitively reacting to daily messages of “Wall Street Journal”.
It seems nonsense but so the majority of individual investors and managers of mutual funds behave. News about the potential redemption of one company by another or increase in profits in the last quarter can be good news – that is the news inducing to purchasing, – or prompt grew of a stock price.
The enthusiasm shown by investors concerning the company only therefore it grows in the price can seem unreasonable, but it is not necessary to forget that the stock market endures now boom under the name “growth investing”. Warren Buffet doesn’t play in such games, including their complete madness.
The bad news inducing these investors to sell, can vary from news about the recession beginning in large industry of economy before failure to carry out on some cents of look-ahead indicators of quarter profit or war in the Near East. We will remember that in present conditions in Wall Street the idea dominates that if the prices for shares fall, it is necessary to get rid of them.
It means that many mutual funds there and then start to sell them simply because everybody does so. As we have already told, Warren considers it as madness. On the other hand, this madness creates for it optimum possibilities for enrichment.
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details about grant industry.