Warren Buffet Wealth by Robert P.Miles

Warren Buffett WealthHaving a disastrous record of 50% paper losses from my portfolio with another 3k of realized losses, I been pondering if I am a cut into trading/investing and kept asking what wrong with myself as some peers that I met online achieving a good track record in their investment and one friend of mine who has influence me into stock investing reaping a good profit by both trading and investing...My friend had mentioned that I have started off using trading techniques without cutting losses, ignoring crucial valuations, suggests that I read some books about investing and recommended me Warren Buffett Wealth – Principles and Practical Methods Used by the world’s Greatest Investor.This book gave a brief introduction about Warren Buffet, the investment talent he processes and his investment journey showcasing some of this brilliant investment he made since he was young such as reselling the coke from house to house with a decent return on investment of 20%(which later in life he acquired the shares), the joint business venture of pinball machine that boost his wealth substantially, the key investments in GEICO Auto Insurance, Coca-cola and Washington Post.It also introduces general principles like “Learning from the Best to be the Best”, "one needs to devote his efforts in order to be successful" and shares with us that wealth is created through owning a business. It also teach an important concept of the Down Market Test where the true measure of a successful investor is not a comparison of performance against the NASDAQ, DJI, S&P but rather how well a portfolio performs during down markets.

It then relates the key processes to become wealthy:
- Begin investing and building wealth early
- Have confidence
- Understand accounting and how business work
- Set Goals
- Save, invest, and live below your income
- Read, study businesses over many decades before you invest- Be a business analyst, not a market analyst
- Concern yourself with what is going on inside a business, and free yourself of any concern with what is going on in the outside markets
- Learn to value business and purchase pieces of them for below what you think they are worth- Make a list of traits that you admire and before you know it you will become the person you want to be- Create another set of character traits that you don’t admire which will also remind you of the person you don’t want to be
- Write down the habits you want to develop
- Select your mentors carefully
- Identify what passion you have that could create wealthIt also shows why wealth is created by owning business by giving an excellent example of how the ownership of a business created wealth and how the Barnes Foundation of Philadelphia strict rules against business ownership bankrupt its own funds as inflation drain the funds which only focuses on fixed income securities (bonds).Then it prompted you to evaluate what kind of investor are you and show define what is an active investor and a passive investor, and the difference between an investor and a trader (speculator). It stated that this is important as it will determine ability to create wealth. Below are the definition of investors and the differences of an investor and a trader (speculator).Definition of 2 types of investorPassive investor
- not wanting or enjoying the day to day activity of evaluating investmentsActive investor
- hands on, fascinated, energetic participant who enjoys intensive reading and learning about all things related to finance, business, the economy and the investment worldStock Speculators VS Business OwnersBusiness owner is concerned with what’s going on inside the business
– with its employees, customers, strategic plan, growth and sales, expense and cost reduction, as well as increasing profits and earnings.Speculator is more concerned about what is going on outside the business or the stock’s market price: the speculator buys something today in order to sell it later at a higher price. “The sooner the better” is the motto of every trader and speculator. Speculator focus on the price, and owners focus on the business. Speculators are market analysts; owners are business analystQuestion to ask yourself if you are an owner or a trader.1) Are you concern with the present and future earnings of a business, or are your evaluating the only its price?2) Are you influenced by reading and research? Or do others influence you? (Following the madness of crowds)Value investingWarren buffet and most value investors are by nature independent thinkers and get little satisfaction by being with the crowd. They do their own research and read nonstop. They observe others but do not follow, taking great delight in choosing their own path. Important step is to do some self discovery to determine your investment expectations, your time frame, and your risk tolerance.Next, it guided us to develop our philosophy (plan) to achieve our results and speaks about the principles and methods Buffet use.Warren Buffet PhilosophyRule number 1: Don’t lose capitalRule number 2: Don’t forget rule number 1Buffet Investment Principles1.Know what you own2.Research before you buy3.Own a business, not a stock4.Make a total of only lifetime investments5.Make one decision to own a stock and be a long term ownerBuffet method (cigar butt method)Old economy stocks that have one or two puffs of earnings left (businesses that have low P/E with a lifespan of twenty years or less)Attempt to buy a dollar worth of assets for 50 cents ( buy things for less that they worth)Work out how much a business will pay you between now until judgment day. Discount that back to today and attempt to buy them cheaper.Buy business you understand, with favorable long term prospects, operated by competent and honest people and available at attractive prices.Calculation Method UsedValue Investing – it is about the careful review and calculation of a company’s book value and intrinsic value and its relationship to market value.Book value is the simple subtraction of assets from liabilities.Intrinsic value concept—what will you pay for a machine that generates $1 a year for ten years? You wouldn’t pay $10 because you would be just getting your money back over 10 years. You wouldn’t pay $9 today to get $1 a year for 10 Years, which would be a return of 11/1%, or 1% a year. What you would pay is determined by how much you seek in return on your investments. You seek an 11% annual return, which happens to be the long term rate of return o equalities over the last several decades, you will offer $3.52 for this machine.Other methods: Present Value Calculation or Discounted Cash flowWays to evaluate Business1) First, he looks at the business. Is it simple? Is it in an industry that he understands? Is it a high profit margin business? Any Debt? What is its return on equity?2) Then he looks at its managers. Are they candid? What are their expansion plans? Are they well financed? How much Business do they own?3) Then he looks at the market place. What is the business value? Can it be purchased at a discount to its market value?Finally, wealth building requires that you know the valuation, price or management influence whether you’re buying, you know the management, the competition, and you understand what would be an attractive stock price.
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This article was copied from http://noob-trader.blogspot.com/, which i really likes, how he summarise important timeless investment principals.

Being on the radio..

Surprise surpise! I was being interviewed by Live 938 Fm for information regarding DBS triple happiness fund. Its my first time ok, i know its nothing big.. but come on! Im probably the first "Ho" family memeber to get on radio right?! Plus with an interview like that to spice up my espically boring life (NS), i couldnt ask for more.
Basically, this Lady journalist (very nice person) found my analysis on the forum , thus she was interested on my take and feeling as an investor of that fund. So i just provided her with my analysis on my take on the fund and then got on radio lor. Well come to think of it, its pretty short, like 10s the most. But im glad to at least have a little taste of what is like being on the radio. Beacuse arh.. for soooo many times, ive been trying to get 978fm to play my songs and hear my dedications, but always can't get thru to them..ahah who wouldve thought a radio wanting to get thru to me ! Quite honored and humbled la, makes me want to work even harder,smarter and gain more knowlegde on finnance and investment.. omg im like soo pumped up about investments-amen to that. I want to know/master/understand/apply the art,techquie and functions of investing wisely and the know hows of the finnacial world. This interview has surped me to go all out to persue my interests and not other pointless activities like tution,aiming for As in my studies, drumming(espeaiclly those that involve japanese ones) and swimming. Well im quite tired of bragging , just for the record, i copied down the scrip from Live 9.38 Fm regarding my interview. :]

-----------------------Updated: 6th November 2008, 1940 hrs ---------------------------
Uncertainty for investors of Capital-Gauranteed Fund
Another group of investors in Singapore is feeling the heat from financial failures on Wall Street.Investors who bought into DBS Triple Happiness Capital Gauranteed Fund, have been informed that their money may not be protected afterall.That's because the fund was gauranteed by a subsidiary of US insurer A-I-G, which is in financial trouble and had to be bailed out by the US government in September.Irene Chan finds out more.So far, investors of the Triple Happines Fund have not been as vocal as the Lehman Minibond investors.Probably because Triple Happiness investors know AIG has received a financial lifeline from the US government.Still, they've been warned in a letter by the distributor of the product, DBS Asset Management,that there is a possibility AIG may run into bankruptcy.So in the event of a default by AIG, its subsidiary -- Banque AIG -- may not honour the capital guarantee on the Fund, and other agreements.22-year old NS man Ivan Ho, who had invested XX thousand dollars in the fund, says he was shocked when he received the letter from DBS Asset Management.He said the POSB relationship manager who sold him the product, had not even informed him at the time that the fund was guaranteed by a third party."I was interested in investing in government bonds, then they recommended me this product, saying that it's like government bonds, very safe, 100 percent return back your capital. So when I first saw the letter, I was in shock, I don't wish to lose all my capital. I would be very upset if the fund actually collapses, because the money is actually for my university studies."But Mr Ho says he's now calmer.DBS Asset Management had assured him that none of the underlying securities have defaulted at this stage and that it's monitoring the situation at AIG.Nicholas Chew, financial consultant at independent private wealth management firm, Providend, explains a number of things can happen under such circumstances.
"If the guarantor goes, then the trustee of the notes can try to get another guarantor. But if worse come to worst, they have to trigger an early termination of the notes, what the investors get back is the market value of the underlying securities less costs. The problem is, in times like these, the underlyings would be hit quite badly."
In the event where investors dispute the outcome, Mr Chew says the course of action for them is to lodge a complaint with the financial institution, or FIDRec, the Financial Industry Disputes Resolution Centre.