Warren Buffett on timing the stock market

Warren Buffett talks about investment versus the tendency to focus on what’s happening today. 

March 8-12 1942, newspapers were filled with extremely bad news from the pacific. Warren was watching a stock called City Services Preferred. It was sold at $84 in 1941 and it was selling at $40 on March 10. 

Warren bought 3 shares of City Services Preferred on March 11, 1942 at $38.25. Dow Jones was down 2% because of all the bad news. Warren bought at the high of the day. City Services Preferred was down to $37 the same day. So the timing of buying was off. 

Eventually, City Services Preferred was called later for over $200 a share. However, Warren sold his share when the stock was up to $40 in July 1942, pocketing $5.25 gain per share. 

The conclusion: don’t time the market. 

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About the author: Hoan Do is a certified leadership coach with John Maxwell Team. Hoan have led multiple teams at Symantec Inc. across the globe delivering world-class solutions to protect consumers and businesses. Hoan is an expert in building highly performing teams. He believes that the best leader is the leader that could grow his followers to be leaders. Hoan has been organizing mastermind groups at work to share with other leaders about transformational leadership and coaching. He has trained many leaders both inside and outside Symantec via mastermind groups, workshops, and one-on-one coaching.
Coaching inquiry can be sent to coach@hoanmdo.com

Making 6 figures #2? How to avoid being one of 29% of American households with no retirement savings

Having a job? You can make it to the top 5%

There are 100 people at 65 years old:
One will be rich.
Four will be financially independent.
Five will be working.
Thirty six will be dead.
Fifty four will be dependent.

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Let’s suppose that most men and women start working at 25 and retire by 65.
How much money do you suppose an average man earn in 40 years?
According to CNBC( https://www.cnbc.com/2017/08/24/how-much-americans-earn-at-every-age.html ), this figure would be over $1.6 million. This is a substantial amount. This is a fortune.

Earl Nightingale in his popular audio program “Top 5%” talks about a research. There are 100 men and women at 25 starting out equally in America, the richest country on earth. Each has as much opportunity as the rest. By the time they are 65 years old:

  1. One will be rich.
  2. Four will be financially independent.
  3. Five will be working.
  4. Thirty six will be dead.
  5. Fifty four will be dependent.

Earl’s tape was in 1960s. However, the stats holds even in this present time. Only 5% are financially independent. This is the top 5% that we all want to belong to.

So according to CNBC above, most people will earn at least $1.6 million ($40K per year * 40 years) by the time they are 65 if they started working at 25. Only 5% makes the grade. 95% are either dead or don’t become financially independent. As I wrote in the article “Making 6 figure? How to avoid being one of 69% of Americans who have less than $1000 in the bank“, the survey by GoBankRates year after year still points out that many Americans who make 6 figures have less than $1000 in the bank. So where does the money all go? What’s the problem?

If you practice karate 40 hours a week, 50 weeks a year, for 40 years, you will agree that you will be an accomplished martial artist. I use Karate in this example as I practiced Musokai Karate for over 10 years. I realized the difference between an accomplished karate master and the rest is how much time they put into practicing persistently. My Shihan Arakaki is a living example of an accomplished Karate master through hard work and persistence.

If you practice anything (piano, acting, investing, programming, …anything) 8 hour a day, 5 days a week, 50 weeks ago, for 40 years, you can become an expert. 

In the above research, the fifty four men and women out of 100 who arrive at age 65 without having become financially independent in the richest land in the world have worked in the economy for 8 hours a day, 5 days a week, 50 weeks ago, for 40 years and have not figured out how to be financially independent for the remaining years of their life. 

The experts say that only 5% make the grade because that is the group that does not conform. They do not follow the crowd. 

Conformity is to act like everybody else. And by acting like everyone else, the odd is that 95 to 5 that we will miss the boat of becoming financially independent.

Why do people conform?

The reason to conform is simply because it is an easy thing to do. We have been taught to conform. From the time we were born through school, we were told what to do. We don’t want to be different as being different is ridiculed by others. We want to be liked and to belong to the group. We spent at least 18 years learning to conform.

Out of school, suddenly we find ourselves to be on our own for the first time. We get a job. The most natural thing for us to do as we have been trained to conform is to look around and see how other fellows are doing their jobs. Since we have always been told what to do, why should we start thinking for ourselves? Thinking for ourselves is much hard than to conform.

By starting at 25 and retiring at 65, you know that people have 40 years to become great at their craft. However, 95 percent won’t do it. The reason is because they do like everyone else, they follow the crowd.

Everyone has a choice. You can choose to follow the crowd to be like everyone else or to join the top 5%. The choice is yours.

If you don’t want to conform, you must think now before it’s too late.

If you decide to join the top 5%, let’s continue. If not, reading more will waste your time.

There are only two steps when it comes to financial independence. And anyone can do these two steps:

  1. One’s attitude toward their work.
  2. The money one can save.

First, no matter what your present job is, it contains many hidden opportunities. Take a moment in quietness, ask yourself those questions, and silently write down the answers:

  1. How can you become an expert in your present industry?
  2. Do you know your job and your industry like a doctor knows about medicine?
  3. What will your job be like in 5 years? Can you do it the same now?
  4. What are some ways that have not been done before to improve your job?

No matter what your job is, it contains the key to greatness. Look for it until you find it.

Second, your financial success has nothing to do with the money you earn but only with the money you save. Unless you save 10% or more of what you earn, you are doing yourself a disservice. Following those steps consistently and you will know the power of saving as well as enjoy your life, especially the later part when you need it most.

  1. First, save one-tenth of what you earn and dont touch it.
  2. Second, for every dollar you save, make it work for you. Make your savings your slaves. Make their children your slaves also.
  3. Third, control your expenditure so that you never have to tap into your saving. Better yet, slash your expense so that you may have some extra dollars to put into your saving. Remember #2, your saving will work for you along with its children, grandchildren,
  4. Fourth, guard your capital. Remember that getting rich is not a quick venture. You must be patient and not jump into any venture that causes you to lose your saving.
  5. Fifth, be disciplined and remember step #4. Warren Buffett follows this principle by saying “the first rule of investing is to not lose money. The second rule is to never forget rule #1”.

For detailed explanation, you can read more at: Making 6 figures? How to avoid being one of 69% of Americans who have less than $1000 in the bank.

Don’t follow the crowd. Start thinking for yourself now. Look for the key to greatness in your job. Start saving and put your saving to work.

Remember that 95% won’t do it. You want to be financially independent. You want to join the top 5%. And you can.

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Other popular articles:

  1. Life lessons from a Uber driver who was laid off
  2. 20 minutes that can change your life
  3. Making 6 figures? How to avoid being one of 69% of Americans who have less than $1000 in the bank.
  4. Making 6 figures #2? How to avoid being one of 29% of American households with no retirement savings
  5. How to get your dream job with no experience – Lessons from Bill McDermott
  6. Leaders are readers
  7. A SPECIAL GIFT FOR YOU – WHY SHOULD I HIRE A COACH?
  8. This simple skill is worth millions, helped many become millionaires, billionaires
  9. How to guard yourself against negative influences

About the author: Hoan Do is a certified leadership coach. Hoan have led multiple teams at Symantec Inc. across the globe delivering world-class solutions to protect consumers and businesses. Hoan is an expert in building highly performing teams. He believes that the best leader is the leader that could grow his followers to be leaders. Hoan has been organizing mastermind groups to share with other leaders about transformational leadership and coaching. He has trained many leaders via mastermind groups, workshops, and one-on-one coaching.
If you are curious about the above method and how you can apply it to your life successfully, open your email and send me an inquiry at coach@hoanmdo.com

 

 

How to invest – Warren Buffett’s 2017 annual letter to shareholders

Warren Buffett released his annual letter to shareholders today Saturday 2/24/2018. Though Warren Buffett has not published a book, his annual letters contain much of his wisdom in investment success and life-changing principles. Since his early years into investment, Warren Buffett has been sharing his own success freely.

The following contains excepts from his letter:

Berkshire Hathaway’s per-share book value has grown from $19 to $211,750 or 19.1% compounded annually. Readers of my article (Making 6 figures? How to avoid being one of 69% of Americans who have less than $1000 in the bank.) can look into Berkshire Hathaway’s shares if they are looking for investment ideas.

Buffett again warns investors not to pay much attention to short-term results: Berkshire owns $170 billion of marketable stocks and the value of these holdings can easily swing by $10 billion or more within a quarterly reporting period. For analytical purposes, Berkshire’s “bottom-line” will be useless.

Buffett chose to communicate his annual report by late Friday or early morning Saturday for a reason not to cause fluctuate in Berkshire Hathaway’s stock price, since investors have the weekend to analyze anything they want to before the market opens.

At Berkshire what counts most are increases in normalized per-share earning power.

There are four building blocks that add value to Berkshire:

  1. sizable stand-alone acquisitions;
  2. bolt-on acquisitions that fit with existing businesses;
  3. internal sales growth and margin improvement at many and varied businesses;
  4. investment earnings from stocks and bonds.

The key qualities Buffett seeks when doing M&A are:

  1. durable competitive strengths;
  2. able and high-grade management;
  3. good returns on the net tangible assets required to operate the business;
  4. opportunities for internal growth at attractive returns;
  5. and, finally, a sensible purchase price.

In 2017, the price of most stocks hit all-time high. Price seemed almost irrelevant to an army of optimistic purchasers.

Buffett warns about deal heat: Once a CEO hungers for a deal, he or she will never lack for forecasts that justify the purchase. Subordinates will be cheering, envisioning enlarged domains and the compensation levels that typically increase with corporate size. Investment bankers, smelling huge fees, will be applauding as well. (Don’t ask the barber whether you need a haircut.) If the historical performance of the target falls short of validating its acquisition, large “synergies” will be forecast. Spreadsheets never disappoint.

Buffett’s simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.

On leverage: we never will operate Berkshire in a manner that depends on the kindness of strangers – or even that of friends who may be facing liquidity problems of their own. During the 2008-2009 crisis, we liked having Treasury Bills – loads of Treasury Bills – that protected us from having to rely on funding sources such as bank lines or commercial paper. We have intentionally constructed Berkshire in a manner that will allow it to comfortably withstand economic discontinuities, including such extremes as extended market closures.

On investing in stocks: Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their “chart” patterns, the “target” prices of analysts or the opinions of media pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be) our investments will be successful as well.

On borrowing to buy stocks: There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.

Investment’ philosophy: When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt. That’s the time to heed these lines from Kipling’s If:

“If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you . . .
Yours is the Earth and everything that’s in it.”

The last portion of Buffett’s letter dedicates to his bet against portfolio managers: a virtually cost-free investment in an unmanaged S&P 500 index fund would, over time, deliver better results than those achieved by most investment professionals, however well-regarded and incentivized those “helpers” may be.

Lessons from his 10-year bet:

  1. Investment funds: Performance comes, performance goes. Fees never falter.
  2. Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.
  3. Stick with big, “easy” decisions and eschew activity.

The annual meeting falls on May 5th and will again be webcast by Yahoo!, whose web address is https://finance.yahoo.com/brklivestream. The webcast will go live at 8:45 a.m. Central Daylight Time.

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Join 4,662 other followers

Other popular articles:

  1. Life lessons from a Uber driver who was laid off
  2. 20 minutes that can change your life
  3. Making 6 figures? How to avoid being one of 69% of Americans who have less than $1000 in the bank.
  4. Making 6 figures #2? How to avoid being one of 29% of American households with no retirement savings
  5. How to get your dream job with no experience – Lessons from Bill McDermott
  6. Leaders are readers
  7. A SPECIAL GIFT FOR YOU – WHY SHOULD I HIRE A COACH?
  8. This simple skill is worth millions, helped many become millionaires, billionaires
  9. How to guard yourself against negative influences

About the author: Hoan Do is a certified leadership coach. Hoan have led multiple teams at Symantec Inc. across the globe delivering world-class solutions to protect consumers and businesses. Hoan is an expert in building highly performing teams. He believes that the best leader is the leader that could grow his followers to be leaders. Hoan has been organizing mastermind groups to share with other leaders about transformational leadership and coaching. He has trained many leaders via mastermind groups, workshops, and one-on-one coaching.

If you are curious about the above method and how you can apply it to your life successfully, open your email and send me an inquiry at coach@hoanmdo.com

The biggest mistake you might make: assign power, influence, authority to someone with a title

Engineer 1 visits the headquarter office and meets a VP at the elevator. The engineer doesn’t know that this is a VP.

Engineer in a very peaceful and pleasant voice: “Hi, how are you? My name is X. I am visiting from another office. This is my first time here. You must be very lucky to work in this nice office.”

VP: “Thank you. Yes, it’s a nice office. What team are you in?”

Engineer: “I am on team Y.”

VP: “It is a great team. You guys are working on some cool project.”

The elevator comes to a stop and they wish each other well.

Later on, when the engineer find out that he talked to a VP, he hopes that he didn’t say anything stupid.

At the end of the day, the engineer takes the elevator to go home and meets the VP again.

Knowing that he’s in the same elevator with a VP, the engineer becomes very uncomfortable. The VP is friendly like he was in the morning and is glad to see his new friend again. Fear grows inside the engineer. He’s intimidated. He just says “Hi” and couldn’t open his mouth anymore.

It’s the same person this engineer meets in two different circumstances. The engineer lets the title and formal position intimidate him. He’s no longer free like he was in the morning.

This is a common mistake people in workplace make. They assign power and authority to someone’s title. They let titles control how they talk to someone.

A title doesn’t make someone a leader. A position doesn’t make someone a leader. What make someone a leader is influence. Influence is earned. Don’t assign power, influence, authority to someone with a title. More importantly, treat everyone you meet like a human being.

How to win a battle but … lose the war

One way: winning an argument without caring about the outcome for the end user…

With the recent Equifax breach, an argument in Mid-May could have been:

Devoted engineers: Apache disclosed a vulnerability in March. We must patch our system with latest updates according to Apache guidelines as it can cause a security breach and impact our customers.

Other devoted engineers and management: We have to release tomorrow. We are not going to delay the release because of an Apache vulnerability. It’s been two months since Apache disclosed the vulnerability and no issue with our services. It’s too late to patch now. We will release according to the schedule or our boss wont be happy.

Management might have won the battle against those devoted engineers but the war was over when the breach happened. Customers suffered. Many of those customers could also be Equifax engineers and management.

How to win the war (might lose the battle):

Engineers: Apache disclosed a vulnerability in the version that our system is using. Patching will delay our release tomorrow.

Management: Let’s patch our system. My job can be on the line but customer First.

When you have lost the battle, but won the war, you have been defeated in a small conflict you have won a larger, more important one of which it was a part. 

#thesamuraicoach, #customerfirst, #equifax, #lifeisgood, #security, #leadership