10 lessons from Warren Buffett

It is always worth listening when legendary value investor Warren Buffett and Charlie Munger are talking. They both are the legendary successful investor with combine experience of more than 100 years. I will give the credit to both of them on how I deal in the stock market.

Below is the clip of Warren Buffett’s interview on USA CNBC of almost two and half hours. I know it will be too harsh for me to ask you watch this whole clip in the middle of the week. But that two and half hour of investment will be worthwhile. But if you don’t have that time to invest then just watch the clip that I am highlighting on each lesson and you can relate with your own personal investment experience in Indian market.

1. Timing the market (4:35 – 6:00)

It is very hard to time the market. Many of us are today thinking that market had a good run and maybe we should wait for it to come down. That is the terrible mistake you are doing in the game of investment.

2. Why stocks look cheaper even at all-time highs (6:05 – 7:00)

In that one minute he explains that why interest rates play crucial role while valuing any assets. Interest rates play gravitational role on the asset. When interest rates are low, asset prices rises and when interest rates are high, assets price are low.

In USA we are looking at the U turn on the interest rate trend and in India we still have room to cut down if we manage inflation. I can write whole one article on this but I think this is not the right time.

3. Should you worry about geopolitical or war while investing? Where should you focus while investing? (10:10 – 12:45)

Should you invest in the stock market or bonds is answered in this section of his clip. You need to have a clear idea when you are investing in any asset and your rationale behind it. Stock market is for the long term and long term means 5, 10 and 20 years. So think in terms of that horizon while investing in any stock. We invested in Indiabulls Housing when the EPS was Rs 50 per share and we have seen sweet business condition where in the next 5 years they can achieve Rs 150 as EPS. Anything better than that is always welcomed.

4. Should you buy looking at where the market is standing? (13:35 – 14:40)

When you are buying any stock, imagine you are buying a small part of that business. Your research and investments should be stock specific not market or any condition specific.

5. How Warren Buffett does research? (21:50 – 23:30)

This is really amazing on how his thought process before investing works. He owns 133 million shares of Apple and this is his rationale. Straightforward and innocent answer.

6. Airlines businesses? What is he looking and what his rationale behind investing airline business is? (30:15 – 33:00)

Two things he is looking into airlines business. First, they are operating at 80% of their capacity and secondly they are not buying extra planes.

7. His views on Free trade (1:04:30 – 1:06:55)

Take care of the people who are getting affected by free trade is his idea.

8. Please don’t have itchy finger (1:21:00 – 1:21:45)

We are sitting on hefty cash right now. It will be better to say that our cash holding is more than our investments. Do not compromise on your standards and have those itchy fingers in your pocket while investing.

9. Should you hold stocks for ever? (1:39:50 – 1:41:20)

He explains when to sell the stocks. We sell our holdings when the quality of business fades away or when some idiot is happy to pay us 3 years future valuation price today.

10. His advice to all investors (2:16:00)

His advice to all the sideliners waiting for the market to correct.

If you get a chance to watch whole video don’t miss that opportunity. There are also few more clips and post that we shared previously on this blog.