Reddit reviews Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds

> Or is there something that I am missing.

Yes.

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So if they have more profits next year, and do the same thing, it happens again and again and again and again. The value goes back up, then it gets distributed out to the SHs. So you have your stock (similar price) PLUS income.

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I suggest you read this and this.

> How do you know what companies to look into purchasing?

You don't always have to look too far. You can get your ideas from anywhere. You could be in a hospital and see that they've purchased new medical equipment. Check out the manufacturer. See if it's publicly traded. Or you can be out at a store, and you overhear customers demanding a certain product but it's always sold out. Find out who's making this stuff. Get the name down.

So, take note of trends. Observe people and their purchasing habits. That will put you ahead of the game, since most people rely on data reports, rather than being on the ground floor, and actually seeing what's going on. But don't forget to evaluate the product personally if you can, or get a face to face review from a friend, or a user.

If the company is producing junk they'll be sure to let you know.

However, if you don't want to do this, you can also use a stock screener. You can filter stocks, and look for bargains by setting the P/E ratio, dividend, market cap, etc. But again make sure the companies you buy into have a good reputation. Reputation is everything these days.

https://www.google.ca/finance/stockscreener

Personally, I like stocks that have a price to earnings of 15 or lower. If you invest in developing foreign markets, like India or China, you'll tend to get an even better bargain. But be suspicious of low p/e ratios. Read their news. See why it happened, and if it's negative, find out whether you think they can recover.

> When you are considering purchasing a share, what should you look for in that company to make an educated purchase?

This can greatly depend on the industry. In the tech industry you'll pay more, because there's a lot of growth. Meanwhile, in say, banking, the ratios will be a lot lower. In general, you'll have to compare a company to its main competitors. See who is in a better position. Go with the #1 guy, the one who is lean, and more efficient. Take a look at their profit margin. Do they make 3% on every dollar they bring in? 4%? Also, you don't want companies which too much debt. That will crush a company.

Again, you have to compare. Each industry is different. Pick a company and compare it to its competitors. See which one is doing better. Read the balance sheet, read the income statements. Look at the charts. Remember, if you're new, you want something stable, something that is continually going up.

Since you're a beginner, I highly recommend practicing with play money before jumping in. Don't be in a rush to invest. Get a feel for the market.

http://www.investopedia.com has a free simulator you can join. Practice there. When you spend enough time looking at stocks, and understanding each point, you will be able to make a better educated guess. I know that sounds like vague advice, but as far as I know, experience is the only way to gain that instinct. But again you don't want to risk losing your money, so a simulator is a good idea.

> When should you sell?

If it goes below a certain percent of your purchase price. Say you bought a stock for $100, and it declined later to $90. That would be a time to sell. But no more than 10%. Like I say, 3.5% to 10% and no more. For me, it's around 5% or so. A big drop tends to indicate further decline.


> How long should you hold a stock for?

That's your personal preference. Honestly, if you get the right company, it could be for your entire life. How long you hold will depend on the shape of the company. Sometimes you get a company, and then it heads for disaster, and you have to sell off. There is no specific period.




If you're interested in picking up a book, check this out:

http://www.amazon.com/Buffettology-Previously-Unexplained-Techniques-Buffett/dp/068484821X

Again, don't take every piece of advice you here. Once when I was 19 years old, I went on a forum, and they talked me out of Apple. That would've been a cool $100,000 in my pocket had I not listened to them. Use your gut. Be skeptical.

The first rule is not to lose any money. Don't take the big risks. Analyze rationally.


More useful links:


http://www.stockta.com/

http://www.fool.com/

Oh, and if you guys want quick, easy money, here's a little trick:

Buy a stock before it splits. If you have a discounter broker, you can sell it off immediately, and pocket the money when the split occurs.

http://biz.yahoo.com/c/s.html

http://www.nasdaq.com/markets/upcoming-splits.aspx

I found Buffetology to be really good as an all-around explanation of how to select stocks using a definite approach to valuing them.

I use a version of the calculations found in this book. Which is a variation of the philosophies in this book. You'd be doing yourself a favor by buying them. Make sure to also get the workbook that goes with the first one.