17. Stay within
Your Circle of Competence
Develop a zone of expertise, operative within that zone.
Write down the industries and businesses with which you feel most comfortable.
Confine your investments to them.
18. Ignore Stock
Market Forecasts
Short-term forecasts of stock or bond prices are useless.
They tell you more about the forecaster than they tell you about the
future.
Take the time you would spend listening to forecasts and instead use
it to analyze a business’s track record.
Develop an investing strategy that does not depend on the overall movement
of the market.
19. Understand
“Mr. Market” and the “Margin of Safety”
What makes for a good investor?
A good investor is one who combines good business judgment
with an ability to ignore the wild swings of the marketplace.
When the emotions start
to swirl, remember Ben Graham’s “Mr.Market” concept, and look for a
“margin of safety”.
Make sure that you also understand Buffet’s concepts of Mr. Market and
the margin of safety.
Like the Lord, the market
helps those who help themselves. But, unlike God, the market doesn’t
forgive those who “know not what they do”.
Bide your time, and wait
for Mr. Market to get depressed and lower stock prices enough to provide
a margin-ofsafety buying opportunity.
20. Be Fearful
when Others Are Greedy and Greedy When Others Are Fearful
You can safely predict that people will be greedy, fearful, or foolish.
Trouble is you just can’t predict when or in what order.
Buy when people are selling and sell when people are buying.
21. Read, Read
Some More, and Then Think
Mr. Warren Buffet spends something like six hours a day reading and
an hour or two on the phone. The rest of the time, he thinks.
He therefore advises to get in the habit of reading. The best thing
to start is to read Buffett’s annual reports and letters.
Finally, restrict your time only to things worth reading.
22. Use All Your
Horsepower
How big is your engine, and how efficiently do you put it to work?
Warren Buffett suggests that lots of people have “400 – horsepower engines”
but only 100 horsepower of output.
Smart people, in other words, often allow themselves to get distracted
from the task at hand and act in irrational ways.
The person who gets full output from a 200-horse-power engine, says
Buffett, is a lot better off.
Make sure that you have the right role models. Strive for rational behaviour,
good habits, and proper temperament.
Write down the habits, practices and philosophies that you want to make
your own.
Then be sure to keep track of them and eventually own them.
Financial success is a “matter of having the right habits”.
23. Learn from
the Costly Mistakes of Others
This is self explanatory and need no comments!
24. Become a
Sound Investor
Buffet says that Ben Graham was about “sound investing”. He wasn’t about
brilliant investing or fads and fashions, and the good thing about sound
investing is that it can make you wealthy if you are in not too much
of a hurry, and it never makes you poor.
To become a sound investor, you need to develop sound investing habits.
Always fight the noise to get the real story.
Always practice continuous improvement.
