Warren Buffet is Not a Day Trader

Kohl's Garner, NC at 185 Shenstone Blvd | Kohl's Hours and Directions
Shop Kohl's in Garner, NC today! Find updated store hours, deals and directions to Kohl's in Garner. Expect great things when you shop at your Garner Kohl's.

Disney Books: Share the Magical World of Reading With Disney Story Books | Kohl's
Enjoy free shipping and easy returns every day at Kohl's. Find great deals on Disney Books at Kohl's today!

Day traders often seek out stories of people who have had amazing success in the markets for guidance. They flock to biographies of financial celebrities hoping to gain insight and tips to get an edge on their own careers. One such celebrity, Warren Buffet, is often seen as a role model, and a recently released book on him, The Snowball: Warren Buffet and the Business of Life, will no doubt increase his influence. But while Buffet has plenty to teach us about investing, his lessons are less applicable to day traders because of the kind of investing strategies that he uses. I’m not at all discounting Buffet’s success, but I do want to stress that traders need to understand the difference between the strategies that will work for them and Buffet’s kind of investing.

Warren Buffet is, of course, a legend. Before he gave almost his entire fortune to charity, he was the richest man in the entire world. In 1962, when he began buying stock in Berkshire Hathaway, a single share cost $7.50. Today, Buffet is Berkshire’ chairman and CEO, and one “Class A” stock is worth more than $118,000.

Buffet is doubtless a financial genius, and many try to follow his advice to become rich. But you need to understand that he is not a stock trader. His investments are not in stocks. Instead he invests in companies.

Buffet has tried to make this clear himself. As he once said, “If, when making a stock investment, you’re not considering holding it at least ten years, don’t waste more than ten minutes considering it.” He has also said, “[s]hares are not mere pieces of paper. They represent part ownership of a business. So, when contemplating an investment, think like a prospective owner.” Based on these principles, he developed what he calls the Inner Scorecard, according to which he invests in “wonderful businesses” that fulfill, amongst others, the following criteria:

· They have a good return on capital without a lot of debt.

· They are understandable.

· They see their profits in cash flow.

· They have strong franchises and, therefore, freedom to price.

· They don’t take a genius to run.

· Their earnings are predictable.

· The management is owner-oriented.

But Buffet goes even further, looking for “subjective” clues to a company’s long term profitability. For example, it is said that once he purchased a company whose owner counted the sheets on the rolls of 500-sheet toilet paper to see if he was being cheated. (It turns out that he was.) Or, in another case, Buffet considered investing in a company whose owner painted only the side of the building facing the street in order to save money. And, in 1983, Buffet acquired the Nebraska Furniture Mart because he liked the way its founder, Rose Blumkin, did business: as a Russian immigrant, her strategy was to undersell the big shots, and she was a merciless negotiator.

There’s a clear pattern here. Before Buffet invests in a company, his team analyzes everything: the financial data, the management (including their biographies and sometimes even their personal spending habits), the company’s vision, mission and principles, the human resource policy, and much more. Then he buys enough shares to actively influence and change the company’s strategies and policies. As he said “Shares represent part ownership of a business,” and he acts on that idea once he is invested in a business.

Warren Buffet may well be the world’s greatest investor. He buys and sells businesses, and he uses the company’s shares to buy himself part ownership of a business. But Buffet is not a trader, and his strategies for success are completely different from those that make money for day traders. He does not analyze market trends, looking for movements. Instead, he looks at a company’s fundamentals and decides whether he thinks that company can grow over the long term. It’s important to keep this distinction in mind if you want to make money in the market. A day trader may well admire Warren Buffet, but he will have to look elsewhere for a model.

Ariana Grande Moonlight Women's Perfume – Eau de Parfum
Seductive and mesmerizing, Moonlight embodies Ariana Grande's confident spirit, optimistic energy and bold stage presence. Moonlight illuminates your true self, celebrates your uniqueness and makes you absolutely irresistible.

Sunny Health & Fitness 25.6-in. Anti-Burst Gym Ball
Sunny Health & Fitness at Kohl's - Shop our full selection of exercise and fitness equipment, including this Sunny Health & Fitness 25.6-in. Anti-Burst Gym Ball, at Kohls.com. Style no. NO. 056.

ili Leather Convertible Backpack
Carry your laptop and other essentials in style with this ili leather convertible backpack.

Peugeot Men's Leather Watch - 2033G
Peugeot watches at Kohl's - This men's Peugeot gold-tone leather watch is a handsome timepiece. Model no. 2033G. Come shop our wide selection of Peugeot watches at Kohl's.

Flower Girl Shoes | Kohl's
Enjoy free shipping and easy returns every day at Kohl's. Find great deals on Flower Girl Shoes at Kohl's today!

FirsTime Ridgeview Arch Wall Mirror
Completely eye-catching, you'll love adding this FirsTime Ridgeview Arch Wall Mirror to your home.

Sonoma Goods For Life® Indoor Outdoor Short Round Pouf
Accent your indoor or outdoor living area with this Sonoma Goods For Life short round pouf.

Sale Armen Living Furniture | Kohl's
Enjoy free shipping and easy returns every day at Kohl's. Find great deals on Sale Armen Living Furniture at Kohl's today!

Samsonico Adult | Kohl's
Enjoy free shipping and easy returns every day at Kohl's. Find great deals on Samsonico Adult at Kohl's today!

Red Enchante | Kohl's
Enjoy free shipping and easy returns every day at Kohl's. Find great deals on Red Enchante at Kohl's today!

Men's Caliville Sherpa-Lined Button-Down Flannel Shirt
You'll warm up to masculine style with this men's Caliville sherpa-lined shirt.

You may also like...