Buffett’s advice : “If you are a know-something investor, able to understand business economics and to find five to ten sensibly priced companies that possess important long-term competitive advantages, conventional diversification (broadly based active portfolios) makes no sense for you.”
The idea that it was hard to find good investments, so concentrate in a few, seems to me to be an obviously good idea. But 98% of the investment world doesn’t think this way. It’s been good for us – and you – that we’ve done this: BRK Annual Meeting 2004
I (Warren) cannot understand why an investor of that sort elects to put money into a business that is his 20th favorite rather than simply adding that money to his top choices-the businesses he understands best and that present the least risk, along with the greatest profit potential.
“With each investment you make, you should have the courage and the conviction to place at least ten percent of your net worth in that stock” – Warren Buffett
Investing is not that complicated. You need to know accounting, the language of business. You should read The Intelligent Investor. You need the right mind-set, the right temperament. You should be interested in the process and be in your circle of competence. Read Ben Graham and Phil Fisher, read annual reports and trade reports, but don’t do equations with Greek letters in them – Warren Buffett, 1993
“There’s nothing different, in my view, about analyzing securities today versus fifty years ago.” – Warren Buffett