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How to make Money in the Stock Market According to Warren Buffett

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					How to make Money in the Stock Market According to Warren
                         Buffett


If you are going to invest in the stock market, then take advice from those that are successful in the
stock market. Undoubtedly, one of the most successful stock investor in the world today is Warren
Buffett. It would be good for us if we take his advice.




Warren Buffett is right when he said that sound investing can make you very rich if you are not in too
much of a hurry and it does not make you poor either which even better. Why is it that the stock market
can make you very rich? Well, because it is the biggest gold mine in the world. It is a multibillion dollar
industry. And 95% of the people in the stock market lose money. And guess where does that mountain
of money go? Yup to the remaining 5%. You can be with that 5% and build your wealth.

How can you be with the 5% that actually make money (not lose money ). Warren buffett gave us the
answer..Buffett said rule no. 1 never lose money, rule no. 2. never forget rule number 1. That means you
NEVER sell on declining prices NEVER! But im losing money! You might say. No you are not! Those are
unrealized losses, paper losses as we call them. You will only lose money when you SELL on declining
prices.

Then how can I make money in the stock market? The stock market is full of opposites. I know, the
reason why you are in the stock market is because you are optimistic and want to make money fast. But
the trick is as Warren Buffett said never attempt to make money in the stock market. Buffett buys on the
assumption that the market will close the next day and not open for the next 5 years. This is a very good
advice. Imagine if you are in the stock market to make money, and you bought a stock, then its price
falls. Let's say you are down 5% two days after you bought the stock.. you might feel a bit concerned
because in your mind you are in the stock market to make money and with the 5 percent decline you feel
you are losing your hard earned money. Let's say you decide to hold on with a bit of optimism. But the
price kept falling... now you are down 15% then 20%..25% you kept holding on until you decide you
cannot take the pain anymore and you would rather save 70% of your starting money and sell after a
30% decline, only to find out that 6-10 months after you've sold at a loss, the stock surged and you
would have made a 50% gain. If only you have not sold. Buying stocks with making money in mind will
make you lose money. Because you will experience stress and pain in seeing your stock holding go down
in value on a temporary decline and you will have emotional selling at low prices.

The stock market does not go up in a straight line. If the price after you bought the stock, gradually
marched to a 50% gain, without a day of decline, I know you would not sell. But with a temporary
decline before the same 50% gain, you would have sold at a loss. Instead of a 50% gain, you had a 30%
loss. This is how the stock market works. It is deceiving most of the time.

Read on.

Becoming successful in the stock market as Warren Buffett puts it in a quote requires only ordinary
intelligence what you need is to control your urges or emotions that get you in trouble. Just like when
you can't control your urge to sell because you see price falling, fearing you will lose all your money. That
also means control your urge to BUY HIGH and SELL LOW because it should be buy low and sell high.
The masses are attracted to rising prices (often at the top). That, means also to not sell too early on a
meager gain, because you fear that prices may go down and you lose your meager profit. If you give in
to this, you will never be truly rich. As Jesse Livermore (a stock operator) puts it: you don't become poor
by taking profits but you don't become rich either.

Buffett recommends to buy and hold. It's up to you of course if you want to buy and hold for a year, 2, 3,
4, 5 years. There is a very high certainty that many years (5 years or greater) after you bought a good
stock, that it will be trading at a much much higher price. You will be with the 5% of people who make
money in the stock market. Not with the 95% that lose money.

A big weakness of would be investors is as I would call it: Financial Impatience. Buffett has eliminated
this human nature from himself. Waiting is always hard...very hard! But if you conquer this like Buffett,
you will be rewarded with millions.

Buffett has many more words of wisdom. We'll cover some more of them in my next blog.
However, Buffett's wisdom will be worthless if we do not start to put at least some money in the stock
market. Want to be rich? Take the risk. Nobody gets rich without ever taking risks. If you don't take risk,
never expect to be truly rich. You'll be just surviving not living.

May Warren Buffett’s wisdom on the stock market bring us wealth.



By: Jayson Flores

				
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posted:9/22/2012
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