Saturday 17 December 2011

Mr. Buffett shared some of his other investment mantras: When to sell a stock?


Mr. Buffett shared some of his other investment mantras:
When to sell a stock?
This, he said, is a harder decision than buying a stock.
Mr. Buffett typically holds on to stocks for years and years. "I don't feel like I have to grow rich in the next day or week," said Mr. Buffett. He said that investors who track stock prices daily are being "just foolish."
If they had bought a farm or an apartment, they would not expect it to appreciate the next day but over a period of time. Why treat stocks differently?
He added that while there's no law against speculating, those investors would "make more money if they don't trade as much."
Mr. Buffett said he would sell a stock only if some better investment opportunity came about, or if something changed at the company, such as its management, which he didn't approve of.
Get the investing mindset
A good investor needs reasonable intelligence and a passion for investing, said Mr. Buffett.
More important is the ability to look at the facts of an investment and evaluate them without getting influenced by what other people think. "You can't get excited because other people are excited," said Mr. Buffett.
He said that humans are susceptible to believing that something that has happened in the recent past will continue to go on. So, every now and then, there's a craze to buy something even at very high, irrational prices. "Then all of a sudden, the music stops," said Mr. Buffett, and the investment comes crashing down.
The key is to detach yourself from such a craze. Of course, that's easier said than done.
The importance of being comfortable
Mr. Buffett usually keeps a few billion dollars as a cash cushion or "margin of safety" at his company, Berkshire Hathaway  Inc., in order to tide over any potential economic or other crises. That margin also allows him to buy businesses which may become attractive during a downturn, he said.
Personally, he said, he doesn't keep much cash but says individuals should hold as much cash in their portfolio as would keep them comfortable during tough times.
"Some people might do something very foolish if they didn't have cash around," said Mr. Buffett, presumably referring to selling stocks after they have lost a lot of value.

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