5. Warren Buffett Stock Basics

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The importance of patience and individuality

Patience
Anytime you find something that looks like massive return usually means massive risk

Pigs get fat and hogs get slaughtered

Patience is truly a virtue. Take your time don't try to get rich overnight. Never break your rules!

Individuality
Think for yourself - that's what all the great investors do!

I've often found that if I was doing what everyone else was doing.... I was probably doing it wrong.

In lesson five, we learned that Warren Buffett has four rules that he uses for investing in stocks. All the rules must be met in order for him to purchase shares of a company. Those four rules are the following: Rule 1: A stock must be stable and understandable Rule 2: A Stock must have long term prospects Rule 3: A Stock must be managed by vigilant leaders Rule 4: A Stock must be undervalued We also learned a very basic valuation technique that Warren Buffett used when he worked for Benjamin Graham. The technique multiplies the P/E ratio by the P/BV ratio and the result needs to be lower than 22.5. A key fundamental of Warren Buffett stock basics is the idea that the stock market is nothing more than a location where he can buy or sell his shares. The market only provides a platform for him to purchase undervalued companies. He always buys on the assumption that they stock market could close tomorrow and not open for five years ñ and it would have no impact on his decision to buy a particular company.