How To Think Like Warren Buffett: Part 1!

Hi guys, this post is the first of a 3-part series on my attempt to explain some of Warren Buffett's fundamental ideas behind his successful investing. Since he is perhaps the greatest investor of all time, I'm sure we all want to adopt as much of his mindset as possible! So let's get straight into it:

Simply, put do your research. You can only do so much research and therefore it is smart to limit your endeavors to a small variety of asset classes. This is of course not to say that you should put all your eggs in one basket, just be realistic about how many different markets you can become highly-knowledgeable in.

Always ask yourself "what is the underlying value of what I am investing in?" The current price in and of itself is of course valid in that you can only buy so much of an asset and it realistically can only increase by so much depending on the industry. However, there is no point investing in something which has a very low price, but no real-world value!

Again, this comes back to underlying value. Investing based on great ideas and the amazing people behind these ideas plus any big companies backing the project, in the case of stock investing, is much less risky than simply doing some technical analysis with Elliot Waves and Fibonacci Levels to predict where price will go. Ideally, the idea solves a yet-to-be solved problem and does so in a smart way with enough financial backing to be seen through to the final product.

I agree with Warren that people over complicate their investing massively. I can't help but cringe when I see someone who has 100 indicators on a chart when doing technical analysis. It is of my opinion that only support and resistance levels and clear chart patterns (mostly congestion patterns) are needed for technical analysis to be successful. These simple indicators are clear to many investors and therefore become self-fulfilling. One thing to think about is whether Warren Buffett sits at his computer staring at 100 different technical indicators, when he could instead be researching the fundamentals that ultimately drives big price changes. I think not!

This marks the end of part 1 and I will be posting part 2 very soon so watch out for it! As always, if you have gotten something from this post please show your support by up-voting and follow so I can continue to make more of these. Thank you for reading.

Legal Disclaimer: I am not a financial advisor so please do your own research beyond reading my blog posts and make your own well-informed investment decisions.