Warren Buffett has produced a number of papers which we sends to his shareholders and because his success has been great, various people have read and studied his writings. One of those people is Jeremy Miller who wrote Warren Buffett’s Ground Rules published by Harper Business, NY, 2016. One of the methods to promote the book is to do a lecture tour and Google Talks had him as a speaker. Mr. Miller found 3 things not to do:

1. Stay away from short term predictions
2. Try not to listen to the wisdom of the talking heads
3. Do not play someone’s else game

The 3 things to do are:

1. think long term in years allowing compounding to help you
2. Establish you own viewpoint – each of us has specialized skills in looking at the markets, accent yours.
3. Play your own game – why did you buy the stock? if the price goes down would you add more? if it goes up that is good.

The rules are simple, how you do it is the complex aspect.

Mr. Buffett typically favors a 15% rate of return as a risk factor. He has a wide variety of stocks he is looking at, not necessarily buying but looking at. When the stocks meet his price,he nibbles and then buys bigger allocations. The reason you need to have a variety of stocks you are looking at is as the markets go up and down (and they will) you can buy good quality stocks at lower prices and see them go back up. The trick is therefore to know which are the good quality stocks and why they are good quality stocks then you will know when to begin to buy, based on your plans and follow through with your decisions and live with them for a few quarters.

Linking to dividend paying stocks, if you are a small investor and expect to hold stocks for a long period of time, getting the perfect price is not that important. What is important is the company will be in business and making profits for a number of years. One method to do that is start with dividend companies and make your list. The companies and industries that are easy for you to follow and as they reach the price you think is good, buy and hold. The reason you want profitable companies is they will continue to pay a dividend and in a bullish cycle the multiple on your stock will be higher than other stocks. If the market declines, the dividend continues and you can buy more. As the cycle changes profitable stocks will rise faster, then the rest of the market catches up to go through another cycle.

There are more questions than answers, till the next time – to raising questions.