Warren Buffet Essay

Financial Management: “The process for and the analysis of making financial decisions in the business context.” (Cornett, Adair, & Nofsinger, 2016, p. 5).

-The advice about investing in the stock market that I found most interesting was that the longer you hold your investments, the greater the probability is of them working.

Although this investment class can be considered the most conservative of the three, the low yield of government bonds in the past 10 years does not lend a comparative metric against many other investment opportunities (Jacobs, 2012). The fixed rate of these instruments allows for a guaranteed return, but should only be utilized at a point in an investing cycle when risk is higher than potential income growth. The 25% allocation that is invested in this class is positioned to provide a long term guaranteed investment, with the possible that these lower rates will not rise significantly in the next few years.

Billy could avoid speculative risks by not buying any fashion stocks and food stocks. Fashion is an unpredictable field, with the fads changing nearly every day and how people view the new products, as well as the popularity of the products. Companies like General Mills, Inc. (GIS), Hershey Company (HSY) and Kellogg Company (K) in the food industry are all going down.

Buffett challenges the conventional wisdom regarding diversification. He argues that holding a few good stocks is far more important than spreading funds across a broad number of stocks. It is a fact that investors have been so oversold on diversification that the fear of having too many eggs in one basket has caused them to invest very little into companies about which they thoroughly know and far too much into others about which they know nothing at all. It is a dangerous thing to do as buying a company without sufficient knowledge may turn out to be even more dangerous than having adequate diversification.

Look at Warren Buffet, who is famous for investing only in companies and businesses that he understands. Certainly in the post-Madoff world, this is an important tenet. Not understanding how an investment proposes to give you a return is a big mistake. So the second key is: understanding.

Here, the discussion should shift to an analysis of Berkshire’s general record, its experience with MidAmerican, and its experiences buying equity positions in the Big Four. The general conclusion will be that Buffett has done very well as an investor and as the manager of Berkshire.

““The name of the game, moving money from your clients pocket to your pocket”, Mark stated. “But if you can make your clients money at the same time it’s advantageous to everyone, correct?” “No, Mark replied…Okay, first rule of Wall Street-nobody and I don’t care if you are Warren Buffet or Jimmy Buffet- knows if a stock is going up, down or sideways, least of all stock brokers. But we have to pretend we know.”” (8)

He is also an economist that specializes in securities markets and investment behavior. In addition to these qualifications, Burton Malkiel has been a lifelong investor.

In regards to investing in stocks, bonds, currencies, or other investment products, it has always been a normal emotion to be happy when a stock price rose and upset when a stock price fell. Yet for Warren Buffet and his team at Berkshire they welcome these declining prices because of the opportunities it brings. According to Warren Buffet, a true investor would be buying stocks and businesses for their entire life, and “with these intentions, declining prices for businesses benefit us, and rising prices hurt us.” Understanding that the investor is going to be a buyer for eternity an investor should

convert some or all of his investment from debt to equity. He said that he has no interest in “becoming a

The sixth point that Mr. Buffett disagreed with is diversification. To be honest, I would like to divide investors into two groups, one is big and the other is small. For a small investor, diversification would undoubtedly cost so much that it is better to concentrate on one or two stocks. Nevertheless, it would be more terrific for a big investor to diversify not only because of reducing the firm-specific risk, but also the market risk by investing stocks with correlation not equal to one. Hence, this statement still remains some questions. Nevertheless, if we look the investments of Berkshire Hathaway, it does diversify its business in insurance, apparel, building products, finance and even flight

There is a sense of complexity today that has led many to believe the individual investor has little chance of competing with professional brokers and investment firms. However, Malkiel states this is a major misconception as he explains in his book “A Random Walk Down Wall Street”. What does a random walk mean? The random walk means in terms of the stock market that, “short term changes in stock prices cannot be predicted”. So how does a rational investor determine which stocks to purchase to maximize returns? Chapter 1 begins by defining and determining the difference in investing and speculating. Investing defined by Malkiel is the method of “purchasing assets to gain profit in the form of reasonably

One of the most successful and intelligent investors, along with Warren Buffett, was a professor at Columbia named Ben Graham. He viewed the stock market in ways that nobody would ever imagine. Through bear markets and bull markets, no matter what the circumstances were, Ben Graham was making money. Ben Graham wrote a book called The Intelligent Investor, which Buffett refers to as “the

What is the lowest level of risk they should expect for their current level of historical