In a press conference on 5/4, Warren Buffett spoke these words of advice to would-be investors:
“You should be able to write down on a yellow sheet of paper, ‘I’m buying General Motors at $22, and GM has  million shares for a total market value of $13 billion, and GM is worth a lot more than $13 billion because _______________.” And if you can’t finish that sentence, then you don’t buy the stock. [he mentioned GM for example purposes only.] All this requires some temperamental detachment from other people’s behavior. Both Charlie and I have a natural instinct in that direction. We value our opinions more than others’ — perhaps to an extreme!”
Buffett goes on to explain his philosphy of buying stocks. He commends the stock shopper whom looks for the bargain, those stocks who are already low. The lower stock prices enable the shopper to purchase more of something, at a better price.
This might be really simple and basic common knowledge to many, but it’s the strategy that Berkshire Hathaway will continue to use for success according to Charles Munger.
My 401k’s slowly making it’s climb, with just a small +0.18 in unit price today. It started out pretty good, but it does seem to have slowed down at a lot lower price than before the slump. I’m relieved to see that it’s progressing. I kind of wish it had held off until after the company had contributed their match. That would have been a significant increase on my match. I guess this is where dollar cost averaging is really going to pay off for me in the long run.
Did anyone not have the same kind of lackluster return to a pre-subprime-lending-crash state?
I’ve now been contributing to my company’s 401k for over a year. It’s valued at about 66% more than I had expected it to be, but it’s about half of what I’d hoped for. Overall, it earned pretty well, but the matched contribution was what really put me over the top. I plan on continuing the aggressive allocation in my 401k’s strategy this year unless my debt is completely cleared first, in which case I would allocate more.
I’d love to hear how yours compared.
I found a great all in one article on CNNMoney.com today. It’s not a site I regularly frequent, but this article is definitely top notch. It covers “10 simple strategies for finally achieving your financial goals“.
It takes a deeper look into saving more money, investing smarter, getting out of debt, getting your career kick-started, and more.
It’s actually a collection of 10 articles, and will take some time to get through all of them, but it’s time well spent.
This wraps up the last of the lessons from The Wealthy Barber, a book by David Chilton.
- When it comes to an emergency fund, pick one that’s appropriate, but you don’t have to exaggerate the amount. If your liabilities are greater or if your income is unpredictable, a larger one may be necessary. Consider current protection such as insurance when building your emergency fund.
- Saving for a child’s education can be tricky as there’s many different options and opinions vary on responsibility. Some parents leave the burden to the children. However, the cost of college is becoming increasingly more expensive, and often cant be funded solely by money earned during summer jobs. If a parent chooses to be willing and able to assist with college savings, there are many tax credits and tax deduction benefits. Consider a benevolent family member who could help. Another option, prepaid tution plans, may have restrict the choice of schools. There’s also education savings accounts and bacculaureate bonds. However, David Chilton suggests a different investment practice for college savings. He advises to use a well-selected equity mutual fund. This benefits in the usual ways of mutual funds, by having dollar-cost averaging, long-term ownership, and forced savings.
- Disability insurance is frequently disregarded, yet usually one of the most critical insurance needs. A staggering fact is that one of four individuals will be disabled for at least a one year period in their lifetime. When someone passes away, they need life insurance because they are no longer an asset to their dependants and the cash flow stops. The sad truth is that a disabled person becomes a liability, causing negative cash flow, which could be financially devastating. If you think you’re covered through an employer or an existing plan, double check the policy and make sure that it provides enough support to take care of your family. If you don’t have it, get it now.
- The last topic covered is staying informed. Money laws change frequently and new benefits and investment vehicles are constantly created. By making a plan using the practices suggested in the book, the plan should be successful in creating a wealthy and satisfying financial future, however events may occur prompting re-evaluation of a chosen strategy. Chilton’s suggested readings include Forbes, Kiplinger’s, Fortune, SmartMoney, and the Wall Street Journal. I advise to watch some TV shows, like Suze Orman and Jim Kramer‘s Mad Money. Listen to some NPR and Talk Radio that cover money advice. I also suggest subscribing to related RSS feeds and reading relevant blogs such as this one to stay current for a wealth of information.