How to Invest Like Warren Buffet

Warren Buffet, also know as the Oracle of Omaha, is one of the most successful stock market investors in history. Starting with the income of a few insurance companies, he invested the premiums so wisely that he is now one of the richest men in the world. His company, Berkshire Hathaway, now owns more than 40 subsidiaries.

Difficulty: Moderately Challenging

Instructions

1. Search for stocks that have a low price to earnings ratio and strong growth potential. Keep an eye on the news for companies to investigate further.

2. Analyze the company. Pay special attention to return on equity, return on capital and profit margins. To determine the present value of the company, calculate its discounted cash flow.

3. Look at qualitative features of the company. Study the company's products and the quality of the management team. Buffet invested in Coca-Cola because of the strength of its brand.

4. Buy the stock. Most stocks can be purchased by opening an account with a discount brokerage.

5. Hold the stock for as long as the company remains financially healthy. Continually analyze the company and assess your position accordingly.

Tips & Warnings

• For more insight into how to invest like Buffet read one of his biographies.
• Don't buy stocks the Warren Buffet owns, buy stocks that he would buy today.
• Most investors will be at a disadvantage because they can't buy stakes in companies that are large enough to influence management.

Resources

• Berkshire Hathaway's website