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Posts: 1
Hi All,
This is My first time posting so I am really sorry if this is not the correct place for post like this.
Alright I am trying to become successful like Warren buffet by investing in companies who’s business model is in scope of my understanding.
I didn’t have 10’s of thousands in surplus cash so i did invested what I felt comfortable losing in few companies in mid of 2020. So far I believe my investment has done well, but what I don’t understand is how one can become wealthy by this practice ? Am I missing anything ?
I live paycheck to paycheck so can’t really keep on topping up my portfolio every month. Also what do you guys suggest when is the best time to take profits ?
I feel I am going directionless with mediocre gains.
All the experts and gurus here would you please be kind enough to enlighten me with your knowledge and tricks of trade.
Thank You.
Posts: 1,227
qamara, I know that a little time has passed since you posted, but I have only just seen it and am trying to put a few words down in reply. What I am conscious of, is that first you understand that I (and for that matter any other person that replies) is not qualified to give investment advice. In mitigation, I have been building my portfolio since the late 1970's and there is not much I have not seen. Sure, I've picked plenty of losers and made many mistakes, but I console myself that I have picked more winners in this time and my average growth for my portfolio is increasing. Since 1979, my average return has been 13.54%.
You wish to be like Warren Buffet (WB) eh? Well he has gone through the same process that you are going through and it started small but has grown. He started by picking companies that were off the radar - the "organic" sort of company that in the 1950's was a family affair. Everything that the company did was paid for with a mix of turnover and profit. This allowed the company to gain a larger footprint in a niche environment that was all done without fuss. And the company paid out dividends to the owners as it had done in the years before where Mum and Dad, plus children were the major shareholders but from time to time raised capital through floating off shares or the issue of new capital with a change in asset allocation.
And then, having cut his teeth to be a 3% shareholder in dozens of small "mom and pop" companies, he was able with the dividends to actually buy companies. These are household names these days.
So, your first question refers to how to become wealth by investment. Well, use the principal that you refer to - buy companies that are family owned and do not attract the attention of large investors. Nowadays this is probably those listed on AIM. And if you wish to emulate WB, then eliminate every company that does not generate a dividend.
That you live within your means is fantastic - stay like that - but you ask about taking profits. Well WB tends to hold companies for ever. But, for the ordinary punter (and like you I fall into that category,), you will not get rich unless you take your profits.
Can I suggest though, that rather than sell your profitable holdings sell those that are not making a meaningful contribution to your wealth?
Actually, why not read that paragraph again?
Sell loser early on. Re-invest the proceeds in businesses that will recover your cash. Hang onto the companies in which you do have holdings and add to your holding when you can. ALWAYS be on the prowl to re-invest the dividends received in companies that generate the returns that you want.
So... there are no tricks. A gain, however mediocre is a gain, but you will neither become poor nor rich until you dispose of your holding.
If you are after tips - think strategically - there is a shortage of computer chips, so buy ASML for instance. with flooding buy carpet makers etc