Warren Buffett: How To Invest In Stocks For Beginners (In 2021)

Here are 8 Warren Buffett tips every new beginner investor should follow when entering the market in 2021…

When you look to the greatest investor of all time many names come up peter lynch benjamin graham george soros carl icon ray dalio but above all of these names one irrefutably rises to the top and that is warren buffett the man who started investing when he was just 11 years old using it to become one of the wealthiest man in the world in this next clip i’m

Going to show you eight tips that buffett gives to the regular person to invest well japanese companies earn very low returns on equity and and uh they have a bunch of businesses that earn four five six percent on equity and it’s very hard to earn a lot as an investor when the business you’re in doesn’t earn very much money now some people do it in fact i’ve

Got a friend walter schloss who worked with graham at the same time i did and and it was the first way i went at stocks to buy stocks selling way below working capital very cheap quantitative stocks i call it the cigar but approach to investing is that you walk down the street and you look around for a cigar but someplace and you finally you see one and it’s

Soggy and kind of repulsive but there’s one puff left in it so you pick it up and the puff is free i mean it’s a cigar but stock i mean you get one free puff on it and then you throw it away and you walk down the street and try another one i mean it’s not elegant but it work you know if you’re looking for a free puff uh it works those are low return businesses

But time is the friend of the wonderful business it’s the enemy of of the lousy business if you’re in a lousy business for a long time you’re going to get a lousy result even if you buy a cheap if you’re in a wonderful business for a long time even if you pay a little too much going in you’re going to get a wonderful result if you stay in a long time i find very

Few wonderful businesses in japan at present now they may change the culture in some way so that that that management’s getting more stockholder responsive over there and returns are higher but at the present time you’ll find a very lot of low return businesses and that was true even when the japanese economy was booming i mean it’s amazing they had a incredible

Market without incredible companies uh they were incredible in terms of doing a lot of business but they weren’t incredible in terms of the return on equity that and that they achieve you talk to the students about companies that you like i don’t mean names i mean what makes the company something that you like i like i like businesses i can understand we’ll start

With that that narrows it down about 90 percent i mean see there’s all kinds of things i don’t understand but fortunately there’s enough i do understand and you got this big wide world out there almost every company is publicly owned so you got you got all american business practically available to you now to start with doesn’t make sense to go with things that

You think you can understand but you can understand some things i can understand this i mean you can understand this anybody can understand this i mean this is a product that basically hasn’t been changed much i’ve added the cherry uh but you know since 1886 or whatever it was and it’s a simple business it’s it’s not an easy business i don’t want a business it’s

Easy for competitors so i want a business with a moat around it i want a very valuable castle in the middle and then i wanna i wanna i i want the duke who’s in charge of that castle to be honest and hard-working and able and then i want a big motor on the castle and that moat can be various things the moat in a business like our auto insurance business at geico is

Low cost i mean people have to buy auto insurance so everybody’s going to have one auto insurance policy per per car basically uh per driver and and i can’t sell them 20 you know but but they have to buy one what are they going to buy on they’re going to buy on based on service and costs most people will assume the service is fairly uh identical among companies

Or close enough so they’re going to do it on cost so i got to be the low cost producer that’s my mo the extent my costs get further lower than the other guy i’ve thrown a couple of sharks into the moat you know but all the time if you’ve got a wonderful castle there are people out there going to try and attack it and take it away from you and i want a castle that

I can understand but i want to castle with a moat around it 30 years ago eastman kodak’s moat was was just as wide as coca-cola smoke i mean if you were going to take a picture of your six-month-old baby and you’re going to want to look at that picture 20 years from now and you’re going to look at it 50 years from now and you’re never going to get a chance i mean

You’re not a professional photographer so that you can evaluate what’s going to look good 20 or 50 years ago what is in your mind about that about that photography company is what counts because they are promising you that the picture you take today is going to be terrific to look at 20 or 30 or 50 years from now about something that’s very important to you maybe

Your own child or whatever it may be well kodak had that in spades 30 years ago they owned that they had what i call share of mine forget about share market share mind they had something in everybody’s mind around the country around the world with a little yellow boxing ring that said kodak is the best that’s priceless they’ve lost some of that they’ve been lost

At all and and not due to george fisher who runs georgia’s doing a great job but they let that moat narrow they let fuji come and start narrowing them out in various ways they let them get into the olympics and take away that special aspect that only only kodak was fit to photograph the olympics so fuji gets there and immediately in people’s minds fuji becomes

More at a parody with with kodak you haven’t seen that with coco’s mode is wider now than it was 30 years ago you can’t see the moat day by day but every time you know the infrastructure gets built in some country that isn’t yet profitable for coke but will be 20 years from now the mode is widening a little bit things are all the time changing that mode in one

Direction other 10 years from now you can see the difference our managers are the businesses we run i’ve got one message to them you know which is to widen them up and we want to we want to throw crocodiles and sharks and everything else gators i guess into the moat to keep away competitors and that that’s comes about through service it comes about for quality

Of product it comes about through cost it comes about sometimes through patents it comes about through real estate location so that’s the business i’m looking for now what kind of businesses am i going to find like that well i’m going to find them i’m going to find them in simple products because i’m not going to be able to figure out what the most going to look

Like for oracle or lotus or microsoft 10 years from now i mean i gates is the best businessman i’ve ever run into and you know they’ve got a hell of a position but i really don’t know what that business is going to look like 10 years from now and i certainly don’t know what his competitors businesses are going to look like 10 years from now now i’ll name one i

Don’t own i know what the chewing gum business is going to look like from 10 years from now i mean the internet is not going to change how we chew them and and nothing much else is going to change how we chew them and then are there going to be lots of new products is it really you know our spearmint juicy fruit and all those going to evaporate some isn’t going

To happen you give me a billion dollars and tell me to go in the chewing gum business and try and make it real dent in wrigley’s i can’t do it and that’s the way i think about business i say to myself give me a billion dollars and how much can i hurt the guy give me 10 billion dollars give me 10 billion dollars and how much can i hurt coca-cola around the world

I can’t do it well those are good businesses now give me some money and tell me to hurt somebody in in some other fields and i can figure out how to do it so i want a simple business easy to understand great economics now honest enable management and and then i can see about in a general way where they’re going to be 10 years from now and if i can’t see whether

It’ll be 10 years from now i don’t want to buy it basically i don’t want to buy any stock or if they close the new york stock exchange tomorrow for five years i won’t be happy owning it i buy a farm and i don’t get a quote on it for five years and i’m happy if the farm does okay you know i buy an apartment house don’t get a quote on it for five years i’m happy if

The apartment house produces the returns that i expect but people buy a stock and they look at the price the next morning and they decide whether they’re doing well or not doing well it’s crazy because they’re buying a piece of a business that’s what graham the most fundamental part of what he taught me you know you’re not buying a stock you’re buying a you’re

Buying a part ownership in a business you will do well if the business does well and if you didn’t pay a totally silly price and that’s what it’s all about and you ought to buy businesses you understand just like if you’re buying farms you ought to buy farms you understand it it’s it’s not complicated uh incidentally in calling us graham buffett i mean it’s just

Pure gram i i was very fortunate because i i picked up a book when i was 19 i got interested in stocks when i was about six or seven and i bought my first stock when i was 11 but i was playing around with all this stuff and i had charts and volume and i’m making all kinds of technical calculations everything and then i picked up a little book and it just said that

You’re not buying some little timber symbol that bounces around every day you’re buying a part of a business and as soon as i started thinking about it that way everything else followed very simple so we buy businesses we think we can understand there’s no one here that can’t understand the coca-cola company i would say there’s no one here that can understand

Some new internet company and that’s i said at the annual meeting this year that if i were teaching a class in business school on the final exam i would pass out the information on the internet company and ask each student to value it and anybody that gave me an answer i’d flunk i don’t know how to do it so we we don’t have huge returns in mind but we do have in

Mind never losing anything and i mean we bought seized candy in 1972. see’s candy was then selling 16 million pounds of candy at a dollar ninety five a pound and it was making two bits a pound or four million pre-tax we paid 25 million dollars for it took no capital to speak of when we looked at that business basically my partner charlie and i really decided

There was a little untapped pricing power there in other words whether that 1.95 box of candy could just easily sell for two or two and a quarter if you could sell for two and a quarter another thirty cents a pound was was four million eight on 16 million pounds which on a 25 million purchase price was fine we didn’t do any you know we’ve never hired a consultant

In our lives well i mean we our idea of consulting has gone by a box of candy you know i needed to uh but what we didn’t know was there was they had share of mind in california i mean there was something special every person in california had something in their mind about seized candy and overwhelmingly was favorable they had taken a box you know valentine’s day

And giving it some girl she kissed him if she’d slap them you know we’d have no business but but if as long as she kisses him you know that’s that’s that’s what we want in their mind sees candy getting kissed and if we can get that in the minds of people we can raise prices and and i bought that and i bought it in 1972 we raised every year i raised the price on

December 26th i raised it the day after christmas so that everybody because we sell a lot of christmas back we’ll make 60 million dollars this year we’ll sell 30 million pounds make two dollars a pound same business same formulas same everything 60 million bucks still doesn’t take any capital and we’ll make more money 10 years from now but of that 60 million we

Make about 55 million in the three weeks before christmas and our company song is what a friend we have in jesus i mean it is it is a good business but the important thing about that business is think about a little christmas is the biggest season by far but women buy for christmas and they plan ahead and buy over two or three week period men buy on valentine’s

Day they’re driving home we run ads on the radio you know guilt guilt guilt guilt you know the guys are gearing off the freeway right left and they won’t dare go home without a box of candy when we get through with them on our radio ads so that valentine’s day is the biggest day but can you imagine going home on valentine’s day and our seas candy is now 11 bucks

A pound thanks to my brilliance and and let’s say there’s there’s candy available at six dollars a pound but you really want to walk in on valentine’s day and hand i mean this your wife’s got all these favorable images of the see’s candy over the years and she sees you and that’s the way she thinks of you during the rest of the year when you really behave kind of

Badly and you walk in and say honey this year i took a little bit and then hand her a box of candy i mean it just isn’t our work following simple tips such as these and sticking to the basics has been the key to buffett’s high investing returns as buffett’s right-hand man charlie munger says we have a passion for keeping things simple thank you warren buffett

So much for teaching us all how to become better investors may you have many more years to impart your wisdom you

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Warren Buffett: How To Invest In Stocks For Beginners (In 2021) By Cooper Academy