Validating investing myths and principles based on what the greatest investor of our times Warren Buffett has said over years
By Research Desk | Dec 17, 2018
In the past several years, we have come across several investing principles, tested many of them and doubted some. So, we decided to explore the principles espoused by the greatest investor of our times -- Warren Buffett.
Warren Buffet has highly influenced the way people invest and over the years a lot of theories have come up which talk of Buffett's way of investing. We analysed all that the sage of Omaha has said and done to see the truth or Mithya from a frame of reference. Myths ride on the wings of fantasy and hyperbole, so does investment principles. Never mind the veracity of these investment principles.
To stress the point, why don't you take the following test with simple True or False answers to them:
- A real value stock will trade at very low valuations -- sometimes you can get them even below book value
- A company that distributes profits to its shareholders is better than one that rarely does
- Investing in gold does have short-term fluctuations, but it always pays-off in the end
- A falling market is like a falling knife. If there is blood on the streets, take your money and stay out
If you answered True to any of the above questions, you have been influenced to see things in a manner that makes you believe in these investment principles. At Value Research, it has been a continuous effort to make investing simple, extending this belief we decode some investing myths that are interlaced with what Warren Buffett says or has done to put the Mithya into context. Internalise the 11 myths, which will help you invest better.
- Value investing is buying cheap, low valuation stock
- Book value is an important metric in value investing
- Intrinsic value, intrinsic value. You have to get to the intrinsic value!
- I'm investing in a stock to make money, not in a business
- No dividends? Is everything okay?
- Are managements really that important?
- Stay away from falling markets and high volatility
- Share buybacks are always good for investors
- Investing for the next 10 years? Are you nuts?
- Investing in gold always pays off
- Commodities offer attractive investments
This story first appeared in August 2013.
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