Investment Strategy

Warren Buffett’s strategies are of much interest and debate to everyone from beginner to professional investors alike. He seems to have taken the road less traveled by the masses of personal investors, portfolio managers, and the academia community, etc. Since his capital wealth has lead him to excessive returns beyond any other market investor, it transcends his approach and the strategies he originates it from to become popular as well as a viable alternative to base investment decisions on fluctuations in stock price.

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Even though Buffett’s approach outright opposes some other academic (or as he calls the high priests of modern finance theories on the market taught in finance courses), his success has brought attention to and is much followed now. Buffett’s approach is not self-composed; he draws from Bill Graham and a few confidantes that he relies on for focus points to his strategiy are Ed Thorp, Charlie Munger, and Bill Miller who all have their own specialization or school of learning to bring to the table.

Mathematics, probabilities, psychology, and good business sense is the key foundation to the focus investing strategy. Risk measurement, using probability distribution of future outcome generally based on the economics of the business in the form of knowledge gained about the prospective business, financial reports, past history and future expectations of growth and stability of company, will determine the risk level for a focus investor.

Focus investing is the premise of this book. Warren Buffett uses this as an approach to portfolio management and explains the intellectual framework needed to succeed at this type of investment strategy. . Warren Buffett has succeeded to become one of the most followed investors of recent times and is second only to Bill Gates as the wealthiest man in the United States.

He has several books written about him and articles have appeared in Forbes, Business Week, CNN and a slue of others about his strategy which he attributes most to simply practiced concepts from Benjamin Graham and good business sense. Warren Buffett is the Chief Executive Officer of Berkshire Hathaway Holdings, an investment firm in Omaha, Nebraska, USA. He was originally a value investor, interested chiefly in assets and has since become a long-term growth investor. In 1965, he bought a textile firm called Berkshire Hathaway.

He used this as a holding company for a range of investments in media, consumer companies, underwriting of property and casualty insurance, candy production and sales at retail, newspaper publishing, retailing of home furnishings, sales of encyclopedias, sales of home cleaning units, manufacture and distribution of uniforms, retail jewelry, and manufacture, import and distribution of footwear which is where he felt he knew the long-term economics. Warren Buffett invests in industries in which he has a comfortable level of knowledge. He believes that you only invest in something you strongly understand.

In his case would mean low-technology firms where the primary products that people need despite supply and demand. He stays away from the technology industry due to lack of forecasting ability. Warren is aware of the reality that technology is and ever growing field and industry but it is hard to determine which company will be the most successful in the long term. Buffett says in the Warren Buffet Portfolio that “An investor should act as though he had a lifetime decision card with just twenty punches on it. With every investment decision his card is punched, and he has one fewer available for the rest of his life. “