Latest News

If you want to be really rich, use these 3 Warren Buffett trading techniques that no one ever talks about

0

S&P 500

3,585.62

-54.85(-1.51%)

 

Dow 30

28,725.51

-500.10(-1.71%)

 

Nasdaq

10,575.62

-161.89(-1.51%)

 

Russell 2000

1,664.72

-10.21(-0.61%)

 

Crude Oil

79.74

-1.49(-1.83%)

 

Gold

1,668.30

-0.30(-0.02%)

 

Silver

19.01

+0.30(+1.62%)

 

EUR/USD

0.9801

-0.0018(-0.19%)

 

10-Yr Bond

3.8040

+0.0570(+1.52%)

 

GBP/USD

1.1166

+0.0043(+0.38%)

 

USD/JPY

144.7200

+0.2770(+0.19%)

 

BTC-USD

19,144.87

-188.88(-0.98%)

 

CMC Crypto 200

443.49

+0.06(+0.01%)

 

FTSE 100

6,893.81

+12.22(+0.18%)

 

Nikkei 225

25,937.21

-484.84(-1.83%)

 

If you want to be really rich, use these 3 Warren Buffett trading techniques that no one ever talks about

Warren Buffett is widely considered to be one of the most successful investors of all time.

He began investing in stocks at age 10, and was a millionaire by his early 30s, when he began buying Berkshire Hathaway stock at $7.60 per share. Today, Berkshire trades at about $400,000 and Buffett has a net worth of $97 billion.

Buffett is well-known for his approach of buying big chunks of blue-chip companies with underestimated prospects and strong management. Then he holds those shares for years, if not decades. The secret of his success, he says, is following two rules:

“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

Don’t miss

Invest your spare change and turn your pennies into a productive portfolio

Mitt Romney says a billionaire tax will trigger demand for these two physical assets

You could be the landlord of Walmart, Whole Foods and Kroger

But there are three lesser-known tactics Buffett has used to build his fortune that savvy investors might want to borrow — even if they sometimes run counter to his better-known investing strategies.

1. Selling put options

You’d think that someone like Buffett who seems devoted to blue-chip stocks would steer clear of complicated derivatives, but you’d be wrong.

Throughout his investing career, Buffett has capitalized on the advanced options-trading technique of selling naked put options as a hedging strategy. In fact, in Berkshire Hathaway’s 2007 annual report, the company acknowledged that it had 94 derivative contracts, which over the year generated $7.7 billion in premiums.

This strategy involves selling an option where you promise to buy a stock at a specific strike price below its current value sometime in the future. This immediately gives you money from the sale of the option. If the share price doesn’t fall, you keep the money.

If the price does fall below the strike price, you purchase the stock at a price that’s less than you would have paid at the time you sold the option, with the cash from the option sale further reducing your cost basis. This is a good strategy on a stock that you wouldn’t mind owning in the first place. In 1993, Buffett used put options to pocket nearly $7.5 million in income while waiting for the price of Coca-Cola shares to drop.

The option is considered “naked” because you haven’t secured another option to buy the stock, such as shorting shares of that same stock to offset your purchase cost.

But keep in mind that this given the risk involved, this isn’t something a newbie investor should try on their own.

2. Investing in small-cap stocks

When you’re throwing around the kind of cash that’s measured in billions, scooping up shares of promising emerging companies won’t work. Shares of small-cap growth stocks of companies typically worth $300 million to $2 billion would simply move too much if the Oracle of Omaha made a purchase that was big enough to make it worth his while.

Read more: Do you fall in America’s lower, middle, or upper class? How your income stacks up

“I have to look for elephants,” Buffett once said in discussing his investment options. “It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in.”

Of course, it wasn’t always like that. Buffett started out his career primarily investing in small-cap companies. He invested more than half of his net worth in GEICO — when it was still relatively small — in 1951 at the age of 20.

One reason those so-called “mosquitoes” are attractive is because shares demonstrate the most growth in the early days of a company’s operation. But just because those little outfits are off-limits to Buffett today doesn’t mean you can’t go after them.

3. Cutting losses when necessary

Buffett’s “buy and hold” approach doesn’t extend to never admitting that even he sometimes gets it wrong. Once losses set in at a well-managed company, that’s a sign that the economics of that business may have changed in a way that’s going to create losses for a long time to come.

As for Buffett, his big misstep recently was investing in airline companies. Berkshire Hathaway once owned a stake in all four major American airlines: Delta, American Airlines, Southwest and United. While he only added these companies to his roster in 2016, by the end of 2020, he’d dropped them all — at a relatively big loss.

Buffett took responsibility for the failed strategy, but was clear he didn’t see a future in airlines and even went so far as to call the industry a “bottomless pit.”

“We will not fund a company that — where we think that it is going to chew up money in the future,” he said at the time.

What to read next

House Democrats have officially drafted a bill that bans politicians, judges, their spouses and children from trading stocks — but here’s what they’re still allowed to own and do

Billionaire Carl Icahn warns the ‘worst is yet to come’ — but when an audience member asked him for stock picks, he offered these 2 ‘cheap and viable’ names

Biggest crash in world history’: Robert Kiyosaki issues another dire warning and now avoids ‘anything that can be printed’ — here are 3 hard assets he likes instead

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Advertisement

TipRanks

‘Stocks Are Looking Increasingly Cheap,’ Says J.P. Morgan; Here Are 2 Names to Consider

The stock market is often a game in reverse psychology. That is, when the mood gets too euphoric, it’s often a sign it is time to sell. Likewise, when sentiment hits the skids, that could be the ultimate signal the time is right to load up the truck. And on that subject, J.P. Morgan’s Marko Kolanovic thinks we are at – or at least near – the bottom. The firm’s global market strategist believes the Fed’s hawkish stance has left stocks “very oversold,” and while inflation remains persistently high

Motley Fool

2 Evergreen Growth Stocks to Buy and Hold Forever

Commonly enough, evergreens have staying power because they’re getting a steady boost from ultra long-term trends in the population or the economy, and that’s part of the secret sauce that can make them killer investments. With that in mind, let’s analyze a pair of evergreen growth stocks that have already made quite a few investors richer by smashing the market’s returns over the last 10 years. Medical device company DexCom’s (NASDAQ: DXCM) makes wearable continuous glucose monitors (CGMs) that help people with diabetes get minute-by-minute data about their blood glucose levels, thereby giving them better control of their symptoms.

Motley Fool

3 Recession-Resistant Agriculture Dividend Stocks That Can Steer Your Portfolio Toward Greener Pastures

Fluctuating commodity prices and varying demand for new equipment and machinery add cyclicality to the agriculture industry. The agriculture industry may not make up a large percentage of the U.S. economy. Deere (NYSE: DE), Archer-Daniels-Midland (NYSE: ADM), and Corteva (NYSE: CTVA) each specialize in a different part of the agriculture industry.

TheStreet.com

Bank of America Likes These Beaten Down Chip Stocks

Semiconductor stocks have tumbled in recent months amid flagging demand, with the S&P Semiconductors Select Industry Index dropping 36% year to date. Bank of America analysts recently discussed their favorite choices in the sector.

TheStreet.com

Americans are Living Paycheck to Paycheck

In the last three months, 46% of consumers had to pay for at least one unexpected expense, averaging $1,400 each.

Motley Fool

Deciding Where to Put Your Money Is Tough. These Are the Top 10 Investments Made by Robinhood Users

Opening a brokerage account and investing your money is one of the best things you can do to build wealth over time. In particular, here are the 10 top investments made by Robinhood users. Robinhood is a really popular trading app — especially for younger people and for newer investors — because it makes investing really easy, it has a simple trading platform, and it has a great mobile app.

Motley Fool

2 Top Biotech Stocks to Buy for the Long Haul

The healthcare industry is a great place to start. Let’s examine two biotechs that seem to be able to do that: Gilead Sciences (NASDAQ: GILD) and CRISPR Therapeutics (NASDAQ: CRSP). Gilead Sciences is a leader in the market for HIV drugs although the company has recently faced some headwinds in this space.

The Daily Beast

Wrestler-Turned-Politician Who Fought Muhammad Ali Dead at 79

Takeo TanumaAntonio Inoki, the Japanese wrestling star who once faced off against world boxing champion Muhammad Ali, has died aged 79.His company confirmed his death, saying “New Japan Pro-Wrestling is deeply saddened at the passing of our founder, Antonio Inoki. His achievements, both in professional wrestling and the global community are without parallel and will never be forgotten.”After Inoki’s wrestling debut in 1960 he became one of the most well-known wrestlers, even fighting Ali in a ra

Reuters

Germany’s RWE buys Con Edison clean energy in $6.8 billion U.S. shift

FRANKFURT (Reuters) -Germany’s largest power producer RWE has agreed to buy Con Edison’s Clean Energy Businesses for $6.8 billion, nearly doubling RWE’s renewables portfolio in the United States, the world’s second-biggest renewables market. The purchase will be partly funded by RWE issuing a $2.43 billion convertible bond to a Qatar Investment Authority unit, through which the QIA will become a 9.1% shareholder in RWE.

Reuters

China JD.com founder Liu settles U.S. rape civil suit

Billionaire Richard Liu, founder of one of China’s largest e-commerce platforms JD.com, has settled a civil suit brought by former University of Michigan student Liu Jingyao, who had accused him of rape. The suit was part of a long-running legal battle between Richard Liu and Liu Jingyao, who was a 21-year-old student in 2018 when she said Richard Liu raped her after an evening of dinner and drinks. A statement from the lawsuit’s parties, and provided to Reuters by JD.com, said: “The incident between Ms. Jingyao Liu and Mr. Richard Liu in Minnesota in 2018 resulted in a misunderstanding that has consumed substantial public attention and brought profound suffering to the parties and their families.”

Reuters

TikTok to partner with TalkShopLive for U.S. live shopping – FT

TikTok did not immediately respond to Reuters’ request for comment while a representative for TalkShopLive declined to comment. Bytedance-owned TikTok’s live shopping platform TikTok Shop is available in Asian markets including Thailand, Malaysia and Vietnam. TikTok Shop allows users to buy products through links on the app during live broadcasts, and the Los Angeles based TalkShopLive app works on a similar concept.

The Fed gets a ‘D’ grade from Wharton professor Jeremy Siegel

Previous article

Search and rescue efforts underway in Florida after ‘catastrophic’ hurricane

Next article

You may also like

Comments

Leave a reply

Your email address will not be published. Required fields are marked *

More in Latest News