MAKING MONEY FROM BUYING SHARES

 

 

‘It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.’

Warren Buffet

 

1.      Keep It Simple, Stupid!

Making money from buying shares in companies is not as complicated as you might think. By sticking to some well known, but rarely applied, principles you may be surprised by what can be achieved.

 

2.      Investing In Great Companies.

Warren Buffet has made a fortune from buying great companies that were undervalued at key points in history, whether it be Coca Cola or Tesco. This is a simple principle, buy low and hold.

 

Of course what makes a great company is arguable, but looking for qualities such as brand value, consistent growth, capable leadership, relatively low levels of debt (gearing) and a robust strategic plan for the future are all essentials.

 

3.      See The Value, Not the Price.

 

‘Price is what you pay. Value is what you get’.

 

                                                                Warren Buffet    

                                                       

Try to identify great companies that may be undervalued. It might be that they are experiencing a passing storm (BP ‘British Petroleum’ may be experiencing such an event as this following the disaster in the Gulf of Mexico with its Deepwater Horizon rig). Even the mighty Coca Cola has suffered peaks and troughs in its fortunes that have resulted in volatility in its share price, yet the fundamental value of the business remained. Harley Davidson shares were trading at under $10 at one point in 2009 and yet look at the share price today.

 

Try and buy a great company at a price that is at historically low levels, or as near as you can get to it.

 

 

 

4.      Buy Low Don’t Sell.

 

Amongst other qualities, the investors like Warren Buffet have applied patience, in large quantities, to their investing career, and a capacity for patience and the ability to practice it is good investment advice.

 

By keeping it simple, and applying some common sense rules, you can set yourself apart from most investors who are out to make money fast by following the crowd. Of course, most fail. As the Chinese say, ‘If you’re poor, change and you will succeed’.

 

Jamie E. Smith

 

 

 

This content was provided by one of our users, Jamie