My colleague and friend Liz Claman interviews Warren Buffet each year and asks him the most popular questions submitted by investors and professionals around the world. I send a couple questions for the interview that I hope to hear opinion on when she interviews him next Monday, May 6th at 9:30AM/ET.
To give you an idea of the contend, here are some of Buffet’s best tips from past interviews on ways to maximize your investment portfolio:
1) Discipline
If you know you shouldn’t eat cheddar fries because they won’t help improve your health, then you don’t, right? Until of course a huge platter is put before you. Well, while Buffett often indulges in steak and fries, he would never break his codes of investment discipline, and that has worked wonders for him and his bank account, and those of his shareholders.
2) Only buy on sale! When he’s looking to buy a stock, he never EVER overpays for it no matter how much he wants it.
If you do overpay, it’ll come back to bite your portfolio returns. He looks at the price-to-earnings ratio of a stock, how solid company management is, how much cash the company brings in from its operations and then make sure the price isn’t elevated beyond what’s reasonable.
3) Embrace the ugly ducklings because they’ll eventually turn into beautiful stock swans.
He loves to say, “Liz, you never want to buy the quarterback who just won the Super Bowl. He’s too expensive. You want to buy the guy in the hospital bed with his leg in a sling because you know he’s cheaper and the odds are, he’ll get better and blossom.”
4) Get a little Gordon Gekko-esque green in your heart, but ONLY under certain circumstances.
This may be the most difficult one, but it may also be the tip that makes you the most money. Be greedy just as others are fearful. When everyone was running away from stocks during the financial crisis, Buffett was elbow deep, buying up the names he’d wanted for so long but were too expensive. Suddenly they were “on sale” and he had lots of dry powder to dive in. He did this with names like Tiffany, Goldman Sachs and Harley Davidson during the housing implosion. All those names–best in class but beaten down– looked like great deals to him just as everyone was running away. He jumped in with both feet, or should I say, a huge wallet and he made a fortune over those investments. Try it. Your portfolio may love you for it!