Five Simple Steps to Investing Like Buffet

1. Buy businesses, not stocks
Think like a business analyst, not a stock analyst. Look into the company's prospect and management, not just the stock price. Remember, when you buy the stocks, it represents the ownership of the businesses.
2. Focus on companies with wide economic moats
Companies that have their cash flows structurally protected from competition should fare much better in an economic downturn, while also increasing in intrinsic value at above-average rates over long periods. Examples include being low cost producer, or have intangibles like patents and brands.
3. Let intrinsic value be your touchstone
The value of a business is the value of all the cash that business can generate for its owners in the future, discounted to today's terms. And since stocks represent ownership stakes in businesses, it makes perfect sense to value stocks via discounted cash-flow analyses. "Value is what you get, Price is what you pay." by Warren Buffett.
4. Always require a margin of safety
Any intrinsic value estimate is based on projections of future cash flows. And since the future is inherently uncertain, it is highly beneficial to only buy at a discount to fair value to account for that uncertainty.
5. Think independently, and be patient
To be greedy when others are fearful, and fearful when others are greedy, is some of the best advice Warren Buffett has ever given.

Warren Buffet Way of investing

INVESTING RULE #1: NEVER LOSE MONEY.

INVESTING RULE #2: NEVER FORGET RULE #1.

Quotations by Warren Buffett.

"Risk comes from not knowing what you are doing."

"When there's nothing to do, DO NOTHING."

Risk Profile EQUIVALENT to How much are you willing to lose?

Good & Affordable Stocks

Guildlines for Investment System and Finding Yours

Basic knowledge of Stocks

this is the current compilation of what i have learnt so far about stocks and some of the important technical terms that you need to know.

P/E Price/Earnings Price per share:Net earnings per share
When P/E is low, stock is undervalued & vice versa. Traditionally, P/E lies between 18-20.
If P/E<10, must do further analysis of the company before buying the stocks are it is likely to go lower.
Stocks accumulate Wealth. Bonds Preserve Wealth.
Stocks offer compounding of returns free of most taxes until you sell the stocks.
FACT:There are no ten-year periods in which stocks didn't do better than anything else.
Stocks reflect the dynamic growth & change of a country.
LONG TERM: Price Appreciation & Dividends.
Company's intrinsic value: company's worth when its ASSETS, EARNINGS, DEVIDENDS, OUTLOOK & MANAGEMENT are all taken into account.
Intrinsic value a reflection of Stock price.
If intrinsic value far above stock price, buy it, or vice versa.

Market Capitalization is the product of PRICE OF STOCK AT GIVEN TIME and AMOUNT OF SHARES OUTSTANDING.

• Large Cap: $10Billion and above-Low risk
• Mid Cap: $2Billion to $10Billion-Intermediate risk
• Small Cap: $500million to $2Billion-High risk

Paying who First?

reference to Rich Dad Poor Dad

Why the Rich gets Richer & Poor gets Poorer

reference to Rich Dad Poor Dad

Financial Statement

reference to Rich Dad Poor Dad

Person with zero Financial Knowledge

reference to Rich Dad Poor Dad

Cash flow pattern of different class groups

reference to Rich Dad Poor Dad

Cash flow pattern of an asset and a liability

reference to Rich Dad Poor Dad

Pyramid of Investments

1. Savings/CDs
2. Stocks
3. Mutual Funds/Bonds
4. ETFs/REITs

REITS

I just found out that there is an even MORE BETTER real estate investment. It's called Real Estate Investment Trusts. The difference is REITS is a paper asset of real estate. It's a fund actively managed by fund managers who invest in commercial properties. Conventional real estate investment involves buying the physical property and this requires lots of money and it's also time-consuming.

What's good about REITS? It functions exactly like a stock. You profit through it's appreciation in price and through it's quarterly dividends.

Hence if you do not have enough cash to buy properties for investment and rental purposes, try it out at REITS.

Start NOW!

Earned Income

• have 3 bank accounts, 1 for expenses and 1 for emergency/opportunity uses and 1 for investments.
• have a Regular Saving Plan. $100/month?
  
• start a part-time job that takes up six hours/week. giving tuition? waiter?

Portfolio Income

• Put a fixed amount of money every month into an index fund for 30 years without missing a single month. Method is called Dollar Cost Averaging.
• Purchase a personal saving insurance for yourself when you are young like me. Lumps sums of money will be given to you upon maturity of approx 30yrs.
• Buy good fundamental stocks with good management and brand names when there is a BEAR market. Reason being, they will bounce back high after the down period.
• Reinvest your dividends or profits from your portfolio investment.
• Put a fixed amount of money every month into 2 well-established blue-chip stocks for 30 years without missing a single month. Singtel?

Passive Income

• Use Google's Adsense if you like blogging.
• Sell your unwanted items through eBay.
• Buy a house and rent it out.
• Create a website selling products using Internet marketing.
• Create network of many small businesses in areas you are good at.
  

Start-Up Informations

Begin by educating yourself on finance. These are some of the recommendations with reference from "4 Steps to Financial Freedom" by Seah Toh.

General Wealth Awareness

• Rich Dad, Poor Dad ( Robert T. Kiyosaki )
• The Richest Man in Babylon ( George S. Clason )
• Think & Grow Rich ( Napolean Hill )
• Pay Yourself First - A Guide to Financial Success ( Jesse B. Brown )

Stock Investment

• The Winning Investment Habits of Warren Buffett & George Soros ( Mark Tier )
• The Intelligent Investor ( Benjamin Graham )

Passive Income

• Earn Revenue With Google Adsense http://www.google.com/services/adsense_tour/
• Multiple Streams of Income Second Edition ( Robert G Allen )
• Multiple Streams of Internet Income ( Robert G Allen )
  

Steps to Financial Freedom

I just read this book"4 Steps To Financial Freedom" written by SEAH TOH and I thought that some of the contents is quite beneficial to you and me. With reference to his book, I shall share some of my thoughts.

In this model, it explains that we need to maximize our incomes in the order of passive income > portfolio income > earned income in order to create financial freedom.

However, this is easier to say than do. To really make the first step, you need to educate yourself on how to pay yourself first from your earned income. Paying yourself does not mean spending on lavish lifestyle to satisfy yourself!!! It means putting aside savings for your investment accounts first before you start paying off bills and expenses.

Next, you should start educate yourself on how to create your first portfolio income and do some practise on it. Subsequently, when your become experienced, start educate yourself on how to use other people's money to drive your engine for your portfolio income. This is called good debt. There is risk involved and hence you have to be careful about it.

And finally, educate yourself on how to create your first passive income. Generally, passive income will be through real estate rental and network/internet marketing.

Therefore, for young adults like me( I am 20yrs only), my plan now would be paying myself
for my portfolio income. In the meantime, I will also continue to build up my financial knowledge. Next I'll create enough wealth to make a down-payment for a house, and then I'll rent it out. As a result, I will have created passive income through rental and portfolio income through investments.

Passive income

Everyone wants to be financially free. that goes for me too. Now, what's your own definition of financial freedom? For me, it's simple. It means the ability to live your preferred lifestyle without you having to work or rely on anyone else for money.
Hence to achieve financial freedom, you would need to earn money without working. That's when passive income comes into the picture. To be "free", you would need to generate enough passive income such that it exceeds your expenses.
There are primarily 2 types of passive income. First is "money working for you". Second is "business working for you".
"Money working for you" includes investment earnings from financial instruments such as stocks, bonds, T-bills, money markets, mutual funds, as well as assets that appreciate in value and can be liquidated for cash.
"Business working for you" includes rental real estate, owning vending, network marketing and internet marketing, just to name a few.
In conclusion, you can never achieve financial freedom through just your hard-earned income. You will need passive income to help you achieve the ultimate goal.
Work hard, But also Work SMART.