The American billionaire investor Warren Buffett has claimed for decades that it is good at allocating capital. In other wordshas the ability to invest money, so that it works hard for him.
Recently, Buffett He has called himself a business selector. This choice appears to be a response to today’s rapid stock markets. It’s a challenge thrown at those who talk about stock picking.
Adopt the right attitude
There is a crucial difference between the mindset of investing in stocks and that of investing in businesses. Buffett’s focus on underlying companies has earned him billions over decades and elevated him to the top of the investing world.
Stock prices move unpredictably. And in today’s digital world, the pace is faster than ever. We often see wild fluctuations in stock prices over hours and days, when 50 or 60 years ago, those fluctuations probably would have taken longer to manifest.
There are opportunities and threats in today’s volatile stock market.
Stock traders seek to take advantage of action and movement. But Buffett focuses on being a co-owner of large companies. Use price fluctuations to buy stocks when they offer a fair valuation for the underlying business.
Most of your investment activities take place within your company Berkshire Hathaway. In his letter to shareholders in 2020, he described his investment approach in characteristically simple terms. His goal is “own all or part of a diverse group of companies with good economic characteristics and good managers“.
That’s all! That’s your one-sentence recommendation for improving returns in the stock market. And it is the backbone of your investment philosophy. The only thing it does is buy those companies at opportune times when the valuation is low enough to make sense over a long-term retention period.
Earnings accumulation
He often talks about buying “wonderful” businesses at “fair” prices. And within Berkshire Hathaway, he has said that it doesn’t matter whether he owns companies in whole or in part by holding some of their shares.
A good example is how he bought shares of the smartphone and electronics manufacturer Apple in 2016when the valuation of the business seemed reasonable.
He recognized the quality of the business and the reasonable valuation at the time. Since then, the shares have multiplied their valuedriven by the success of the company.
Apple has been racking up profits in recent years. And Buffett has been reaping the rewards in his stock portfolio thanks to their long-term investment in the business.
Nothing is certain or guaranteed when it comes to owning stocks. All businesses can face operational challenges at times. And it’s easy to lose money in the stock market because of that.
However, Buffett’s clarity of thought and careful research have helped give him an advantage in the markets over many years.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
