Listen to Buffett

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When it comes to making money in the stock market, no one does it better than the "Sage of Omaha". No one. Be sure to run far far away from those who criticize Buffett!

Here are some of his guiding principles/wisdom that you should, for the most part, follow (or refine for your own needs) for the rest of your investing or trading life. Do you really want to make money or do you just want to fool around?

Some hedge fund managers are able to make billions in a year due to luck and high leverage and other people's money (a small fee on huge sums of money is still lots of money), like John Paulson who shorted the real estate market. When they succeed, they get a huge cut of the profits and they become rich literally overnite. If they make the wrong bet, on the other hand, they go out of business. In a way, these guys are merely one-hit-wonders that are at the right place at the right time. In no way should you follow them, because you won't make enough on one trade to retire rich. You got leverage but you do not have other people's money that they do.

When these hedge fund guys retire and trade their own accounts, do you think they will do well like before? I doubt it. For one, they cannot afford to make wild bets because they are trading only with their own money. It would not be worth the risk. So likely, they will not be making one-hit-wonder leveraged bets.

So you want to learn to be a consistently good investor or trader. That means you need to adopt some of Warren Buffett's wisdom, just like any basketball player would want to apply some of Michael Jordon's basketball wisdom. Jordon knows basketball, just like Buffett knows stock market.

That means things like leverage should have no place in your trading/investing because Buffett thinks leverage is a really bad idea. And the truth is, in the long run, leverage is always a bad idea in the stock market, no matter how you look at it. Leverage can include things like excessive margin usage and excessive options and futures trading. Really think about why that is so. Many very bright folks haven't figured it out, to their own eventual demise.

Listen, Warren Buffett had annualized return of about 20% for 40 years and he became the world's richest man (next only to Bill Gate's). So think about this: Nobody has ever come close to Buffett's returns consistently. Certainly not those who use high leverage. Isn't that so? You would think those who use leverage should be able to beat the socks off Warren Buffett. Nothing can be further from the truth. When you use excessive leverage, you violate Warren Buffett's major rules for making money:

Rule 1 : Never Lose Money
Rule 2 : Never forget Rule 1

The truth is, you lose alot of money time and time again when you use leverage.

And do you really need excessive leverage just to beat 20% a year? Anybody who thinks so, is just not thinking straight. The key is consistency, not leverage. So you shouldn't be thinking about how many hundred percentages you can make this year. Instead, you should be thinking if your system is consistent in making you money, with the goal of beating at least 20-30% annualized returns for 30-40 years if you want to end up like Buffett!

Still confused? Then get the manuscript.

What Warren Buffett said...

* For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up.

* Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.

* The important thing is to keep playing, to play against weak opponents and to play for big stakes.

* Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.

* There are all kinds of businesses that Charlie and I don't understand, but that doesn't cause us to stay up at night. It just means we go on to the next one, and that's what the individual investor should do.

* We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.

* Charlie and I decided long ago that in an investment lifetime it's too hard to make hundreds of smart decisions. That judgement became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart - and not too smart at that - only a very few times. Indeed, we'll now settle for one good idea a year.

* I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.

* We're more comfortable in that kind of business. It means we miss a lot of very big winners. But we wouldn't know how to pick them out anyway. It also means we have very few big losers - and that's quite helpful over time. We're perfectly willing to trade away a big payoff for a certain payoff.

* Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

* Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'?

* We will reject interesting opportunities rather than over-leverage our balance sheet.

* "If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?"Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall."This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

* The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it.

* Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.

* You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right—and that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else.

* If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.

* There seems to be some perverse human characteristic that likes to make easy things difficult.

* If you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don't have to do anything I don't want to do.

* I am out of step with present conditions. When the game is no longer played your way, it is only human to say the new approach is all wrong, bound to lead to trouble, and so on. On one point, however, I am clear. I will not abandon a previous approach whose logic I understand ( although I find it difficult to apply ) even though it may mean foregoing large, and apparently easy, profits to embrace an approach which I don't fully understand, have not practiced successfully, and which possibly could lead to substantial permanent loss of capital.

* I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.

* Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.

Beanieville: Up 549% Since July 2008, 3rd-party Verified

From July 2008-July 2009, Beanieville was up 180% as verified by third-party Covestor that links directly to our brokerage account. Read about it HERE.

From July 2009 to present, Beanieville is up 132%. When you get to the site, remember to select "beanieville cash+equities" from the dropdown menu of the Performance box to get the real return that considers cash positions.

All in all, Beanieville is up 549% since July 2008.*


*At 549% gain, a model $10,000 account would be up to $64,900 since July 2008. (Please note that we have not included tax considerations, but one can trade in long term accounts such as IRAs to defer taxes.)

**Disclaimer: There can be no assurances that you will make this rate of return when you purchase and use the manuscript. It could be more or it could be less, depending on the individual.

Buy the manuscript now

Learn from the World's Great Investors

source

Six luminaries share their outlooks and investment strategies:

WARREN BUFFETT Chairman, Berkshire Hathaway
I have no idea what the stock market's going to do tomorrow, or next week, or next month or next year. But over a ten-year period you will do considerably better owning a group of equities than you will owning Treasuries. In fighting the economic war, we've taken action that sows the seeds of substantial inflation down the road. Not in the next six months or year, but ten years from now the dollar will buy a lot less than it buys today.

BOB RODRIGUEZ Chief executive officer, First Pacific Advisors
Don't run with the herd. Being surrounded by people who are doing the same thing as you offers a false sense of protection. Being a loner is extremely uncomfortable, but it's far better. Today, being a loner means owning short-maturity, high-quality debt on the bond side. And if the U.S. government continues to blow up the nation's balance sheet through massive deficits, you should probably move at least 20% to 40% of your assets out of the U.S.

JEREMY GRANTHAM chief investment strategist, Grantham, Mayo, Van Otterloo
The recent rally has been very speculative, favoring risky assets over the past few months. I'm sorry if you missed investing at the market's March lows, but don't compound the damage to your portfolio by chasing gains in risky assets. We're at the beginning of a seven-year period of lean returns. You should only be buying the highest-quality blue-chip com­panies, where valuations are most attractive.

BILL GROSS Co-chief investment officer, Pacific Investment Management Co.
The biggest danger right now is that you'll earn 0% on mattress money, or virtually 0% in a money-market account or at the bank. Yes, that money is safe, but the economy and inflation may come roaring past you at higher levels. You also have to consider diversifying outside of the U.S. The dollar is a weak currency, and as it devalues against other currencies, our standard of living will suffer. Higher returns relative to risk lie in Asia and Brazil.

MARTY WHITMAN Co-chief investment officer, Third Avenue Management
Do what we do: Find extremely well-financed companies that do not rely on continuous access to the bond or stock markets for refinancing, that are run by competent management teams and that have favorable prospects for growth. Buy these companies' stocks when they are available at a meaningful discount. All other systems of investing are concerned with predicting stocks' near-term price movements.

JIM ROGERS Chairman, Rogers Holdings
Diversification is garbage -- it's something brokers invented to avoid getting sued. You only need four or five good ideas in your life to get really rich if you avoid mistakes. And the one way to avoid mistakes is to stick with what you know, whether it's clothes or cars or commodities. Then, when you see a major development in your area of expertise, you'll know better than Wall Street when to buy or sell. Otherwise, you should put your money in the bank.


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I like what Jim Rogers is saying, which is similar to Warren Buffett: Put most of your money in a few good stocks and watch it like a hawk. After many years trading and investing in the market, I believe I understand what they mean and why they take that approach. Do YOU understand? If not, you go figure it out.

Jim Rogers says you only need four or five good ideas in your life to get really rich. He's absolutely right. Here's 2 ideas I'm gonna give you right now that can catapult your long term returns:

1) Invest in my manuscript and skip many years of wasting time and money.

2) BYDDF (courtesy of Warren Buffett)

Think for yourself

You know, throughout the years I've read so many books on trading and investing that I stopped keeping track of them. I just know that it's in the hundreds.

Unfortunately, many books are merely a repetition of each other. Not many offer anything fresh and new and valuable. It's as though the authors read a bunch of books and decided to write a book of their own to make some money. The ideas are not original and most likely came from other authors before them. We don't even know if the authors can make any money in the stock market from reading their own book!

That's why I set the price for my manuscript relatively high, because I know it's original and contains money-making ideas that are valuable and scarce. I did not steal my stock market approach from anybody. It was conceived in my own head after many years of toying in the stock market. And, I make money from using my own approach, as I've given a synopsis of that HERE. There is a little bit of learning curve you have to go through on your own if you've never traded the stock market before; but once you get comfortable with trading, my approach can be life-changing for you.

Now, there may be lots of common sense things you read about in trading books, even though many are simply parroted from other books. Like, "Take your losses quick and let your profits run". In practice, it's actually alot harder than it sounds. If you set a hard 7-8% stoploss on mid cap and smaller cap stocks or any volatile stock, you tend to get stopped out. Get stopped out twice and you'll have to make back nearly 20% just to break even. The 7-8% stoploss idea came from William O'Neill who founded Investors Business Daily. If you're gonna use the 7-8% stoploss rule, it would make sense for you to follow O'Neill's work and read Investors Business Daily and trade similar stocks he would trade. Basically, you would want to trade O'Neill's system if you use the 7-8% stoploss rule. Why most traders apply the 7-8% rule and not follow O'Neill is beyond me. They are using that 7-8% stoploss rule out of context, imo, with potentially disastrous results.

Ultimately, you have to think for yourself when it comes to making sense of what you read or hear. There are lots of seemingly sensible ideas being passed along from one trader to another. Being able to apply those ideas and make money in the stock market is another story. Just keep in mind that almost every trader has read some stock market books, but 90% still fail.

Sick And Tired

Are you sick and tired of being sick and tired of stock picks that flame out after you buy it, each one taking a bite of your precious capital? When you're down 50% already, what strategy do you employ to rebuild your capital? Do you throw whatever money your have left and gamble with penny stocks or options hoping for a quick double or triple to make you whole once again?

There must be a better way, isn't there? Well, there is. Even health professionals are getting in on the game using a novel approach and enthused about it. Here's a recent one who sent me an unsolicited email:


"Thanks for the manuscript. It was a great read, and gave me some definite lateral insight thinking. It was worth every penny. Is your name/nickname beanie? Not sure what to call you........ I'm an R.N. with two artificial knees from giving to others my whole life, and now I'm in a position where none of our social systems will help me (because I have the "valuable R.N. license", so I will help myself, and make three times my hourly wage with the insights you have provided me. I will succeed because I am patient, and will do trades the way a sniper tracks his mark.
God bless you, and your family.
Regards, Karl"

(Karl K., Arizona)


www.traderbeanie.com

Beanieville: Up 339% Since July 2008, verified

From July 2008-July 2009, Beanieville was up 180% as verified by third-party Covestor that links directly to our brokerage account. Read about it HERE.

From July 2009 to present, Beanieville is up 57%. When you get to the site, remember to select "beanieville cash+equities" from the dropdown menu of the Performance box to get the real return that considers cash positions.

All in all, Beanieville is up 339% since July 2008.*


*At 339% gain, a model $10,000 account would be up to $43,900 since July 2008. (Please note that we have not included tax considerations, but one can trade in long term accounts such as IRAs to defer taxes.)


www.traderbeanie.com