Top secrets of Warren Buffett’s success

With an estimated net worth of $62 billion, the world’s richest person and the greatest investor of all time, Warren Buffett ‘s timeless philosophy of value investing has proven relevant and profitable in all types of markets and financial environments.

Following his simple strategies, he has converted the holding company Berkshire Hathaway into a powerhouse today.

However, despite being simple, he believes in doing things patiently and differently because that’s the only way to stand tall in a crowd.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently,” he says.

You believe him or not, but some of the top secrets of the stupendous success he has achieved as an investor are here:

ery few people are aware that one of the top secrets of Warren Buffett’s stupendous success is simple living and high thinking.

In fact, anyone with modest means can claim to be leading a simple life. But give one money and one would start behaving like a king.

That, however, is not the case with Buffett who still leads a very simple life considering his status. Like, he lives in a house he bought ages back and dresses up in normal clothes.

“I just naturally want to do things that make sense. In my personal life too, I don't care what other rich people are doing. I don’t want a 405 foot boat just because someone else has a 400 foot boat,” he says.

You believe him or not, but some of the top secrets of the stupendous success he has achieved as an investor are here:

Unlike many investors around us, Warren Buffett never has had any unrealistic expectation from the market.

No wonder, he says that earning more than 12 per cent in stock is pure dumb luck.

“During the 20th Century, the Dow advanced from 66 to 11,497. This gain, though it appears huge, shrinks to 5.3 per cent when compounded annually .... For investors to merely match that 5.3 per cent market-value gain, the Dow – recently below 13,000 – would need to close at about 2,000,000 on December 31, 2099!”

Thus, “if your adviser talks to you about double-digit returns from equities, explain this math to him,” he says.

One thing that Warren Buffett doesn’t do is try to time the stock market, although he does have a very strong view on the price levels appropriate to individual shares.

A majority of investors, however, do just the opposite, something that financial planners are always warning them to avoid.Buffett also likes to keep his investment portfolio limited and simple, and believes in adopting simple investing strategies.

“I want to be able to explain my mistakes. This means I do only the things I completely understand,” he says.

According to his philosophy, keeping one’s attention limited to selected stocks and investment avenues, and not diversifying too much also helps.

“Over time, you will find only a few companies that meet these standards -- so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist temptation to stray from your guidelines: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes,” he says.Buffett does not believe in reinvesting earnings in the same business. Because no one can guarantee you the same return again.

May be you may loose your money in that process. So it is always better to look for new avenues where one can optimize returns.

“There’s no rule that you have to invest money where you’ve earned it. Indeed, it’s often a mistake to do so,” he says.It is very easy to follow others and very difficult to carve one’s own way out. But it is only the second strategy which often makes one successful.

This philosophy holds true for the stock market as well.

“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,” Buffett says.

US crisis not a cause of concern: FM

Finance Minister P Chidambaram on Thursday said that there is no cause of concern for public sector banks as they have no exposure in US-based financial institutions, which are in deep credit crisis.

"Our banking institutions are insulated from the US crisis. PSU banks have virtually no exposure while ICICI Bank has some," he said in New Delhi.

Chidambaram was replying to queries on the fallout of global financial crisis precipitated by the collapse of Lehman Brothers and buyout of Merrill Lynch by the Bank of America.

The Finance Minister further said that there would be some credit tightening, but the Reserve Bank of India (RBI) is seized of the problem.

On the fate of Tata insurance venture with the American Insurance Group, which has been taken over by the US government, Chidambaram said the Tatas have assured insurance regulator IRDA that all Tata-AIG payment obligations will be met.

Country's largest private sector lender ICICI Bank has reported an exposure of Rs 375 crore in the senior bonds of Lehman Brothers Inc.

ICICI Bank has said its London subsidiary has 57 million euro (about Rs 375 crore) exposure in Lehman Brothers which has filed for bankruptcy protection.

20 Microns Ipo Analysis

Promoted by Chandresh S Parikh and seven others, 20 Microns was incorporated in Gujarat in 1987 to manufacture white non-metallic minerals in India. The company is a leading manufacturer of micronized mineral products including micronised ground calcium carbonate, china and calcined clay,

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Vishal Information Technologies Ltd IPO

Public Issue of 27,90,000 Equity Shares of Rs.10/- Each (Equity Shares) of Vishal Information Technologies Limited (the Company or the Issuer) for Cash at a Price of Rs.[*] per Equity Share

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Ten mistakes equity investors generally make

People lose money in stock markets more because of their own mistakes, than any market turmoil and other such things. For instance, it has generally been observed that equity investments are often guided by greed and investors seldom do their homework before putting their hard-earned money in stock

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Market Rumour For July

Market Rumour For July

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KSK Energy Ventures IPO Analysis

KSK Energy Ventures (KEVL) develops and operates power generation projects through various special purpose vehicles (SPVs). It is a step-down subsidiary of KSK Power Venture Plc, listed on the London Stock Exchange. Through its wholly owned subsidiary KSK Energy of Mauritius, KSK Power Venture Plc will hold a 55.24% stake in post-issue

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Somi Conveyor Beltings Ltd IPO

Issue of 62,27,860 equity shares of Rs. 10/- each at a price of Rs.35/- per equity share (including a Premium of Rs.25/-per Equity Share) of Somi Conveyor Beltings Ltd for cash aggregating to Rs.21.80 Crores (issue). The issue comprises of contribution by promoters, of 14,99,286 equity shares of Rs. 10/-

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Real estate sector facing severe cash crunch

The recent bloodbath in the real estate sector has started taking a toll. Almost all large developers are now facing a severe cash crunch and finding it difficult to complete their ongoing projects. In fact, the situation is so bad that most of them have reported a 50-70% cash shortfall. Industry sources told SundayET

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Commodity Market

What is a commodity market? A commodity market facilitates trading in various commodities. It may be a spot or a derivatives market. In spot market, commodities are bought and sold for immediate delivery, whereas in derivatives market, various financial instruments based on commodities are traded. These financial instruments such as 'futures'

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Emerge a winner in volatile markets

A bout of negative news flows combined with the growing concern over inflation and soaring oil prices saw the Indian markets going into a downward tailspin last week. So much so that the Sensex lost ground in four out of the five trading sessions. The previous week, according to Kotak Securities, was the most disastrous week for investors as the

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Lotus Eye Care Hospitals IPO

The Objects Clause of the Memorandum and Articles of Association of the Company enable it to undertake the activities for which the funds are to be raised in the present Public Issue. Further, it is confirmed that the activities, which the company has been carrying out until now is in accordance with the object clause of Memorandum and

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Archidply Industries Ltd IPO

Public issue of 66,15,720 equity shares of Rs.10/- each for cash at a price of Rs.[*] per equity share (including a share premium of Rs.[*] per equity share) aggregating to Rs.[*] Crores, (hereinafter referred to as the issue

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First Winner Industries Ltd IPO

Public issue of 55,00,000 equity shares of rs.10/- each for cash at a price of Rs.[*] per Equity share aggregating to Rs.[*] Crores (hereinafter referred to as the issue), comprising of employee reservation of 1,00,000 equity shares of face value of Rs. 10/- each at a price of Rs.[*] per equity share for cash

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What an IPO grade can and can't do for investors

The grading of an initial public offer (IPO) is a new product, launched in mid-2007 by CRISIL. It is the first time that a product like this has been launched anywhere in the world. It is important for investors to understand

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Sejal Architectural Glass Ltd IPO

Public issue of 91,94,155 equity shares of Rs.10/- each for cash at a price of Rs.[*] per equity share (including share premium of Rs.[*] per share) aggregating Rs.[*] Crores (the issue), by Sejal Architectural Glass Limited (company/issuer). The issue would constitute 32.84% of the fully diluted post issue paid-up equity capital of our company.Pri

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Avon Weighing Systems Ltd IPO

Public issue of 1,37,33,033 Equity Shares of Rs.10/- each of Avon Weighing Systms Ltd (The Company or The Issuer) for cash at par (i.e at a price of Rs.10/- per Share) comprising of Promoters Contribution of 38,96,633 Equity Shares of Face Value of Rs.10/- for cash aggregating to Rs.3.89

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Niraj Cement Structurals IPO Analysis

Niraj Cement Structurals (NCSL) is a small-sizes construction company focusing on the road segment. It also makes pre-cast paver blocks. Sales of paver-blocks account less than 0.5% of total sales. The construction contracts business model involves acting as main contractor, contracts through joint venture (JV)

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Niraj Cement Structurals Ltd IPO

Public issue of 32,50,000 equity shares of Rs.10/- each for cash at a price of Rs.[*] per equity share aggregating Rs.[*] Crores (hereinafter referred to as the issue) by Niraj Cement Structurals Limited (hereinafter referred to as NCSL or the company or the issuer). The issue comprises a reservation for eligible employees of 3,25,000 equity shares

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Bafna Pharmaceuticals Ltd IPO

Public Issue of 64,00,000 equity shares of Rs.10/- each at a price of Rs.40/- per equity share (including share premium of Rs.30/-per equity share) for cash aggregating Rs.25.60 Crores by Bafna Pharmaceuticals Limited (Hereinafter Referred to as the Issue). The issue will constitute 40.05%

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Anus Laboratories Ipo Analysis

Anus Laboratories, Started in Hyderabad in 1996 by K. Hari Babu, Anus Laboratories e manufactures basic and advanced intermediates and fine chemicals. Some of the key intermediates produced are 2,4-dichloro-5-fluoro acetophenone (DCFA) (an intermediate for synthesising quinolone antibiotics like ciprofloxacin),

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An Introduction to an Exciting Market - FOREX

The largest traded "market" in the world is not the U.S., Japanese or European stock markets. It's the foreign exchange market. It's also called FOREX for short, or called the cash currency or spot currency market. Speculators can and do trade this huge market, in which over 1 trillion dollars (and other currencies) can change hands every day.

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Gokul Refoils and Solvent Ipo Analysis

Promoted by Balvantsinh Rajput, Kanubhai Thakkar, Mrs. Bhikiben Rajput and Mrs. Manjulaben Thakkar in 1982, Gokul Refoils and Solvent extracts solvents; refines edible oils, castor oils and their derivatives; and manufactures vanaspati. Besides 680-tonne-per-

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Ten golden rules of Dalal Street

Currently, the Indian markets are in doldrums and nobody is talking of stocks or investments. You may think justifiably so, as the markets are headed in no direction. Is it not exactly the opposite of the exuberant times we were witnessing a few months back. Conversely, bottoms are made in turbulent times.

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IPO allotement Status For Aishwarya Telecom Ltd

IPO allotement Status For Aishwarya Telecom Ltd

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Corporate Results- Summary

Salora International rises 43.52% in the year ended year ended March 2008Moser Baer (India) reports net loss of Rs 71.72 crore in the March 2008quarterKaushalya Infrastructure Development Corpn reports net profit of Rs 0.60crore in the March 2008 quarter

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Stocks that are equipped to face the future

The long-term investor can be compared to mango-growers. Like them, he too understands the need to pick the right seed and has enough patience to wait for the seedling to blossom into a full-grown tree. He knows that it will be a while before his investment gives returns. However, the long-term investor differs from the mango farmers in a key aspec

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Gokul Refoils & Solvent Ltd IPO

Public issue of 71,58,392 equity shares of Rs. 10 each of Gokul Refoils and Solvent Limited (Gokul or our company or the issuer) for cash at a price of Rs.[*] per equity share [including a share premium of Rs. [*] per equity share] aggregating to Rs.[*] Crores (the issue). The issue comprises a reservation of upto 75,000 equity shares

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Mkts to see deep, long correction: Rakesh Jhunjhunwala

The question bothering the markets still remains - is there more pain left and what is the road ahead? To find out answers to these questions, CNBC-TV18’s Stocks Editor, Udayan Mukherjee caught up with ace investor and market expert Rakesh Jhunjhunwala in a special series called ‘Hunt for the Bottom’.

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CRR hiked 50 bps, Markets to Be Volatile

The inevitable happened on Thursday evening. In its customary style, the Reserve Bank of India (RBI) hiked the cash reserve ratio (CRR) for banks to suck out money from the system—a move that follows duty cuts and export bans in the war against inflation. What surprised many was the timing of the measure since the market was expecting it on April 2

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Important Rules of Technical Trading

Map the TrendsStudy long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale "map of the market" provides more visibility and a better long-term perspective on a market.

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Before You Make a Trade- Trading Check List

A "Trading Checklist" of prioritized criteria not only will help you decide when to execute a trade, but will also help you identify potential winning trades. What kind of stuff should a trader put on a Trading Checklist? That depends on the individual trader.

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Volume and Open Interest: How to Use it to Trade More Effect

Futures volume and open interest are significant factors to monitor when trading futures, for several reasons. First, let's define the two terms. Open interest is the total number of futures or options

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Aishwarya Telecom Ltd IPO

Initial public issue of 40,00,000 equity shares of Rs. 10 each for cash at a price of Rs. [*] per equity share (including share premium of Rs. [*] per equity share) aggregating Rs. [*] Crores (hereinafter referred to as the issue). The issue comprises a reservation for eligible employees of upto 1,00,000 equity shares of Rs. 10 each (the em

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Coping With Risk and Uncertainty

How do you cope with the risk and uncertainty that are built into markets, and are you coping effectively? In this and my next article, I will be tackling these important questions.The topic of coping actually begins with the notion of stress. Stress is a characteristic set of physiological, cognitive, and emotional responses to threat.

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Sensex is predicted to reach 24 K by March '09

This philosophy is embraced by even the modern day prophets of randomness, Burton Malkiel and Naseem Nicholas Taleb. Mr Malkiel popularised the concept of randomness in the movement of Stock prices in the ’70s. Mr Taleb, now famous for his ‘Black Swan’ theory, concluded that risk models used by brokerages are all useless as they cannot predict the

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Eight mistakes to avoid while investing

Overconfidence - Don't be unrealistically optimistic A bull market makes retail investors believe that they are geniuses - after all, anything they put money into goes up. This overconfidence in their own abilities leads to a complete disregard of the risks involved. Every new generation that invests in the market ignores past experience.

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How to pick dividend stocks in a troubled market

Even if stocks go nowhere this year—a distinct possibility as US recession looms—investors can get returns by hunting for companies that pay healthy dividends. You receive the company’s quarterly payouts even if its stock, and the entire market, heads south.

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Stocks bought by mutual funds during market crash.

Stocks bought by mutual funds during market crash.What are mutual funds buying during Stock market crash?Mutual funds have bought

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Advance taxes point to healthy quarterly results

If the advance tax numbers for the fourth quarter of the current fiscal year are anything to go by, India Inc. should report strong set of financial results for the January-March period. The companies will start declaring

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Investors may soon get to access SEs' trading system

Investors in Indian markets can soon have direct access to the exchange’s trading system, albeit through the broker’s infrastructure, a practice very popular in developed markets. Capital market regulator SEBI issued a circular saying only institutional investors would be allowed to access this facility in the first stage - called

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D-Street may witness volatility on Q4 results, global cues

Investors on Dalal Street are likely to continue witnessing volatility this week, driven by quarterly earnings by corporates and global cues, as analysts believe impact of soaring inflation may have been discounted. The benchmark index Sensex closed at 15,343.12 on Friday with a loss of 489.43 points, as concerns of rising inflation and a new

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