Investment – Page 2 – The Samurai Coach

Warren Buffett series #6 – Advice to start investing

You can’t look around for people to agree with you. You can’t look around for people to even know what you are talking about. You have to think for yourself.

Advice to start investing:

Start young.

The big thing about investing is that we started building this little snowball on top of a very long hill. We started at a very early age rolling the snowball down.

The nature of the compound interest is that it behaves like a snowball of sticky snow. The trick is to have a very long hill.

If I am to start out today with $10,000, I would do exactly the same way. I would start going right through companies. I would focus on smaller companies because that would be working with smaller sums and there’s more chance that something is overlooked in that area.

You have to buy businesses or a little piece of businesses called stocks and buy them at an attractive price. You can’t expect anybody else to do it for you. You’ve got to know what you know and what you don’t know.

Within the arena of what you know, you have to pursue it very vigorously and act on it when you find it.

You can’t look around for people to agree with you. You can’t look around for people to even know what you are talking about. You have to think for yourself.

The hard part of the process is the first $100,000. The people who get there quickly are helped if they are passionate about being rational, very eager, and opportunistic, and steadily underspent their income grossly.

About me and why this series:
I got a life-changing experience studying Warren Buffett’s annual letters in 2013 after 10 years of speculating, market timing, charting, and forecasting. I started investing in the Vietnamese stock market in 2015 with what I saved from my engineering job. In 2018, I decided to study Warren Buffett’s investing again by going through all of available Berkshire Hathaway’s annual meeting videos. It has been another life-changing experience. Warren Buffett’s teaching is a real germ and yet not many people replicate. Hence, I am committed to share what I learned.

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Warren Buffett series #5 – What to look for when determining if a person is honest or not?

What to look for when determining if a person is honest or not?

We have to have some evidence of behavior in front of us. If we work with someone over a period of a few months or more, we can come up with a pretty high batting average in terms of how they behave.

People leave track records in life. By the time you at 22 or 23, you will have left quite a track record and the world would be able to figure you out.

Track records are important. If you start early trying to have a perfect record in some simple thing like honesty, you are well on the way to success in the world.

You can have the reputation you want. If you list all of the things that you admire in other people, you will find out that almost everything you list are qualities you have have if you set out to do that.

The best way to have what you want is to deserve what you want.

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Warren Buffett Series #4 – The scuttlebutt method – how to use it to analyze a business

You really want to start with a business where you think the economics are good, where they look like a seven-footer, and then you go out with a scuttlebutt approach to possibly reject your original hypothesis. Or maybe you confirm it.

Scuttlebutt method: You can’t do too much of scuttlebutt. The general premise of why you are interested in something should be 80 percent of it. You don’t want to be chasing down every idea using the scuttlebutt method.

So you must have a strong presumption. You should be like a basketball coach who runs into a seven-footer on the street. You are interested to start with. Now you have to find out if you can keep him in school, if he’s coordinated, … That’s the scuttlebutt aspect of it.

As you acquire knowledge about businesses, first do some reading about them, then get out and talk to competitors, customers, suppliers, ex-employees, and current employees, … You will learn a lot. But it should be the last 20 percent or 10 percent.

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Warren Buffett series #3 – What teenagers can do to prepare to become an investor?

If you are interested in investments, you should take the accounting courses. You should do a lot of reading and get as much business experience as possible.

If you are interested in business, you ought to learn all the accounting you can by the time you are in your early 20s.
Accounting is the language of business. It doesn’t mean it’s a perfect language. You have to know the limitations of that language as well as all aspects of it.

You should work at a number of businesses – in term of part-time employment or anything else. There’s nothing like seeing how business operates to build your judgement in the future about businesses.
When you understand what kind of things are competitive and what kind of things are less competitive and why that works that way, all of that adds to your knowledge.

You should do a lot of reading.

If you are interested in investments, you should take the accounting courses. You should do a lot of reading and get as much business experience as possible.

You should talk business people with people that are in business to find out what they think makes their operation tick or where they have problems and why.

If you understand business, you understand investment. Investments are simply business decisions in terms of capital allocation.

Any dollar you save before you get out and start having a family is probably worth $10 later on simply because you save it. The time to save is young. You’ll never have a better time to save than really free formation of a family.

Work for yourself first and put the money aside. I was able to save everything I made in my teens and those dollars got magnified quite a bit.

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Warren Buffett Series #2 – How to be a better investor and a better manager

What to look for before you commit to an investment? What kind of checklist should you go through?
The following is what Warren Buffett answered to similar questions.

The investment checklist is the checklist to look at a business:

We look at whether we can understand the business. That means they sell a product that we think we understand or we understand the nature of the competition, what could go wrong with it overtime.
Once we find that business that we understand, we try to figure out whether the economics of it means the earning power over the next five or 10 or 15 years is likely to be good and getting better or poor and getting worse.
Then we try to decide whether we are getting in with some people that we feel comfortable being in with.
Then we try to decide what an appropriate price for what we’ve seen up to that point is.

The checklist that goes through our mind is simple, not complicated. Knowing what you don’t know is important and sometimes that’s not easy. Knowing the future is impossible in many cases, difficult in others, and sometimes relatively easy. We are looking for the ones that are easy. If you think of buying a service station or a dry cleaning service to invest your life savings in, you’d think about the same sort of things.

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