Investment Advice From Warren Buffett

Best Growth Stock – For those who have no idea what to invest, the third richest man in the world says what to do to make your money is safe and profitable.

As usual, every year, Warren Buffet, the third richest man in the world according to Forbes magazine, published on its website a letter to shareholders of his investment company Berkshire Hathaway.

The words of one of the most successful investors in history, are full of keen observations about the behavior of markets and the economy, which can be quite useful not only for the shareholders of the company, but for all who are considering to invest their money.

Best Growth Stock presents seven financial advice drawn from Buffett’s letter this year. A complete guide for novice investors.

1. Bad times, rather than a threat is a business opportunity

Investors need not fear facing adverse circumstances. “Politicians and pundits have constantly complained of the big problems facing America. However, our citizens now live six times better than when I was born, “said Buffet.

When investors are allowed to absorb by pessimism and uncertainty often tend to be wrong. More to do bad things, look for opportunities that are on paper.

The key to success is to get rid of short-term vision, filled with despair and distrust, and focus on the potential impact on investment in the long term. “Money will always flow into opportunities,” said the billionaire.

2. Businesses ‘fashionable’, are not always the safest and most profitable

Warren Buffet says he is prepared to invest and is ‘ready to fire his weapon and’ to make a big acquisition. However, Buffet has not yet pressed the trigger, which suggests it is having trouble finding good deals.

“Buffett’s company now has a cash reserve of $ 38 billion. This amount is higher than the company had in its history, “said Stifel Nicolas analyst Meyer Shield to The Wall Street Journal.

So if Buffet is driving cautiously business, would be worthwhile for other investors also follow suit. This may be a sign that market valuations are at levels too high.

Do not be dazzled by the fashion. The most popular investments can involve high risk and the idea is not to buy stocks with prices ‘inflated’.

3. Eye with excessive debt

No doubt many people have become rich with borrowed money, but the excessive indebtedness has also been the way for many are in ruins.

The most serious problem is that living to be can become quite addictive. There are very few that behave conservatively and after trying a loan, do not fall into the temptation of always being in debt.

As taught by the subprime crisis, being in debt is very risky too, because when we do well and profits are magnified in hard times so with the loss.

“As we learned in third grade – and some I learned in 2008 – any series of positive numbers, regardless of the impressive than the numbers can be evaporated when multiplied by zero. History has told us that too often produces zero leverage, even when used by very smart people, “said Buffet.

In business, debt can also be lethal. Heavily indebted companies often assume that their obligations can always refinance. Although this assumption is generally valid, occasionally getting resources can become a difficult task, either company-specific problems or a credit crunch.

In these cases, companies must meet their obligations and the only way to do that is with cash.

Buffet makes an analogy between the credit and oxygen. “When it is abundant, their presence goes unnoticed. But when needed, its absence is noticed. And a brief absence of credit, can bring to its knees for many companies. In September 2008, the disappearance of credit, knelt at the economy of a country. ”

4. Liquidity is key to business survival

Buffet emphasizes the need to have money available to deal with significant losses or to acquire companies with potential, especially in times of financial turbulence.

His company maintains at least $ 20 billion in pocket money to take unexpected costs, as it had in its insurance business when Hurricane Katrina hit the United States or make quick purchases.

5. Premise: invert terceroscomo money if it were your own

If people choose to give money to a group of experts to invest for them, is key to who will manage their money, act and feel these resources as their own. That is, they will hurt their losses and benefit from their profits.

Winston Churchill once said something that also works very well in the business world, “you give shape to their homes and then they give way to you.”

Bureaucracies only create more bureaucracy. Buffet’s invitation is to follow the model of your company, Berkshire Hathaway, where operating costs are low and places special emphasis on a compensation model that makes the managers, officers and directors to behave like owners. In Berkshire, “You and I (shareholders) are lucky to have them as stewards.”

6. Coca Cola, the recommended action

Warren Buffet rarely makes prediction about an action. However, this time venturing to talk about Coca Cola.

Since buying this action in 1995, the company’s dividends have increased. Buffet says that “in 2011, is almost certain to receive $ 376 million Coca Cola, that is U.S. $ 24 million more than it earned last year. In ten years, I hope that the $ 376 million to bend. ”

At the end of this period, the billionaire would not surprise me to see earnings annual earnings of Coca Cola exceeding 100% of what you paid for that investment. Confirming once again its premise “Time is the friend of big business.” Buffett’s company has 8.6% of the shares of Coca Cola.

7. Wells Fargo will pay dividends to shareholders

U.S. bank dividends will begin to rise. The Federal Reserve, after the financial crisis froze the dividend levels of most banks were weak or strong, for two years.

According to the billionaire, now, Wells Fargo enjoys economic strength, so it has been forced to maintain a dividend payment artificially low.

At some point, probably soon, the restriction of the Federal Reserve will rise and so, Wells Fargo may resume the policy of distribution of dividends to its owners deserve, writes Buffet. At that time, bank dividends will increase by hundreds of millions of dollars a year, says Buffett, who has a 6.5% stake.