Looking for stock market lessons? In this article I am going to be giving you a lesson on how to pick stocks like warren buffet.
Stock market lessons – how to think like Warren Buffet
Here are five tips for picking stocks like Warren Buffet
· Think of stocks like a business – most investors think of stocks as nothing more than a bunch of numbers on a screen. Instead think of your self as a part owner of the company you have invested in. Doing this helps you to avoid making badly thought out decisions, helps you become more focused on the long term and allows you to analyze situations in greater detail.
· Increase the size of your investment – according to buffet over diversification can hurt you just as much as lack of diversification. Make significant investments in just a handful of companies. By performing proper due diligence you should feel comfortable enough to dedicate a large portion of your assets to a stock.
· Reduce portfolio turnover – rapidly buying and selling stocks will diminish your returns. This is because portfolio turnover increases the amount of tax you have to pay as well as the amount you must spend on commissions. You must think long term to avoid taxes and commissions; this will also make you more prone to riding out short term fluctuations.
· Ignore market forecasts – prophets of doom should be ignored. On the other hand eternal optimists are not always right. Instead you should focus on finding shares that have been undervalued by the market, the idea here is that once investors realize the stocks value you will make a lot of money.
· Understand the psychology behind investing – there is a specific mindset behind every successful investor. They tend to focus on probabilities, statistics and economic issues instead of letting their decisions be ruled by emotional thinking.
By following the tips given in these stock market lessons you will be able to pick stock like Warren Buffet and make far better investment decisions. If you are looking for more stock market lessons please visit my homepage by following the links below.