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How Buffett Does It
Book

How Buffett Does It

24 Simple Investing Strategies From The World's Greatest Value Investor

James Pardoe
McGraw-Hill, 2005

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Editorial Rating

6

Qualities

  • Applicable
  • Well Structured
  • Concrete Examples

Recommendation

This book is a great example of the architectural and design mantra, "form follows function." Its "form" is that of an easy-to-read handbook explaining the basics of value investing. Its "function" is to explain how Warren Buffett, a self-made investor who is now worth about $40 billion, used value investing to make his fortune. Buffett’s premise is that people should base their investing strategies on common sense and search out assets that are selling for less than they are worth. For this, you don’t need esoteric mathematical formulas; all you need are the guidelines that this book clearly enumerates. Although author James Pardoe often merely reiterates what Buffett has said in his own books, Pardoe deserves credit nevertheless for packing his handbook with illuminating examples and stories. getAbstract.com believes this book will be practical for anyone intimidated by investing, overwhelmed by data or vulnerable to pressure from brokers. In his description of value-investing, Pardoe raises a good question: Why does Wall Street dislike it so much? Buffett’s answer: "It’s too simple."

Summary

The Most Successful Investor in the World

Many consider Warren Buffett to be the world’s most successful investor. He inherited no money, yet today he is worth more than $40 billion. Despite his success as an investor, most academics and business students do not study his philosophy - maybe because his ideas are so straightforward. He says:

  • Choose a simple approach over a complex one.
  • Develop emotional balance.
  • Be patient.
  • Think independently.
  • Do not become distracted by major economic events.
  • Invest in a few choice holdings.
  • Don’t be overactive.
  • Buy and hold.
  • Study companies’ bottom line results. Don’t choose stocks based on their price alone.
  • Take advantage of unexpected opportunities.

To apply Buffett’s methods:

  • Study accounting - Learn how financial markets operate. Read articles and books by famous investors, such as Benjamin Graham, Warren Buffett and Charles Munger.
  • Cultivate a healthy skepticism - Brokers almost always have something to sell, so be sure you put your own financial well-being before theirs.
  • Learn about Buffett’s track record...

About the Author

James Pardoe is the principal attorney with Pardoe & Associates.

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