Warren Buffett Investing Basics

By | August 5, 2016

Warren Buffett Investing BasicsExpanding on the subject of Passive Income, one good way that you can generate passive income is by “investing” in the stock market. To do this, learn the Warren Buffett Investing Basics and you are learning from the best in equity market investment. I have put investing in quotes because it is investing if you know what you are doing but “gambling”, “speculating” if you do not know what you are doing in the stock market.

It is common to hear tips about the stock market, like “buy low sell high”, “don’t put everything into a single basket”, “diversify”, “contrarian theory”. In addition, you will also hear advices like “do not time the market”, “do cost averaging”, “buy only companies you understand”. I am illustrating how confusing this can all get.

Then again, you have the one seemingly solid advice which is “buy the blue chips”, “buy good dividend yield counters”, “buy the growth stocks”, “buy and hold”. You also start digging into fundamental analysis and technical analysis.

Very soon, the myriad of tips, advices, methodologies, strategies can be compiled into a PhD thesis. The problem is that you still don’t have a proven stock investing strategy and the more you read up, research, do you homework, the more frustrated you may get.

I have been through this journey myself, and finally I just decide that perhaps the best approach is to fall back to fundamentals and learn the fundamental investing principles from none other than Warren Buffett. Much has been written about Warren Buffett and it does not help when there is too much information out there with regards to his investment principles. I have found a good summary write-up here.

Value Investing and What It Is

Value investing is defined as the strategy of selecting stocks that trade for less than their intrinsic values. I have been in the Value Investing Singaporestock market for a while now but recently I decided to enrol in a value investing course. I am not advertising and this is a honest review of the course by Value Investing College (VIC) which I sincerely wish to share with you, the actual course is however offered only in South East Asia I think. This review is for the Singapore class.

The course lasts a total duration of about 3 days (2 evenings of 7pm to 10 pm and 2 full days) and follows a very systematic instruction framework:

Value Investing College Investment Framework

  • It asks you your interests areas, so as to identify companies which you may know well
  • It teaches you where to look for companies to explore investing in, it also provides grounding into you to think of buying shares equivalent to buying into companies
  • The analysis framework is very comprehensive, first the economic moat of a company is discussed followed by the financial analysis such as profitability, cash flow position, return on equity, debt level as well as risks which may impact the company’s financial performance
  • The next step is the appropriate valuation method of the company (asset based, dividend stock, growth story)
  • Building the right portfolio consisting of the right mix of dividend stocks, growth stocks and options strategy is then discussed
  • A special module of writing put and call options as part of the total strategy is also discussed

I have over-simplified the framework here as it is risky to elaborate any further and give the impression that by reading, the whole course can be mastered.

Learnings from the Course

I am not a beginner when it comes to investing in stocks, and my track record is not too bad; which means overall I do make money, haha. Many of the contents taught are not new to me either, having read tonnes of books. The greatest benefit I get is that the experienced founder and instructors at VIC have put it altogether in a practical and proven methodology for people to follow.

I feel a sense of greater confidence and it also cultivates a discipline that I put myself through whenever I want to invest into a counter; it will be a thorough process of going through the steps to reach a conclusion whether to proceed to invest in the company and at what reasonable price. It is a strategy and no longer just a gut feel when buying any shares.

Of course, the quantitative analysis is the simplest and I must say the most difficult is still the qualitative analysis and there is no easy way but to research and find out more about companies before buying into them. One guideline is to stick to what you know and don’t buy anything in a particular industry which you do not know or do not understand, advices given by both Warren Buffett and Peter Lynch.

The course is not free but I feel that if you are trying to do serious investing, you might as well invest in yourself first. People research when buying consumer goods and scout around for special promotions or discounts, why don’t we learn how to buy good stocks when they are traded at great discounts and below their intrinsic values. If you are keen to learn more, please do contact me, and I can even get you a discount to the course fees.

I have immediately put into practice what I have learned starting with building up the dividend stock portfolio which will give me the passive income while I will be building up the growth stocks as well as earning some options premiums as part of the whole strategy.

Happy investing and lots of wealth! Please leave me comments below while I may share future posts on specific trades which I make and the analysis behind.

I leave you with a video from Mary Buffett endorsing the founder of VIC.

2 thoughts on “Warren Buffett Investing Basics

  1. LD

    Hi Liong Hai,

    Couldn’t find a contact you page so I thought I’d leave a comment here. I would like to get in touch about the value investing course, could you contact me pls.



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