Warren Buffett: How to Make 50% Per Year

Warren Buffett achieved 50% return on small capital during his early years. When asked how he would try to do it again today, he shared the following ideas:

Focus on things that are knownable and important.
I don’t care about a possible recession; I don’t spend a minute thinking about it. The next 20 years should be good; we’re in the game forever. We focus on things that are knownable and important. We don’t know how to forecast, it’s meaningless to us.

We will win by playing our game or finding weak opposition.
We look at ourselves as golfers. We don’t know which holes will come and in what order, but over 18 holes, we will win by playing our game or finding weak opposition. See’s Candy, Coca-cola – nothing else is in your mind when it comes to candy or soda. Share of mind equals share of market.

Attractive opportunities come from observing human behavior.
In 1998, people behaved like frightened cavemen (referring to the Long Term Capital Management meltdown). They will be frozen by fear, excited by greed and it doesn’t matter what their IQ, degrees etc is. Growth of 50% per year is with small capitalization, not large cap. It’s just capitalizing on human behavior. It’s human emotion that make opportunities when people are frozen by fear or excited by greed. Human behavior allows for success if you are able to detach yourself emotionally.

Seek out publishers of stock information and look for various investment guides.
Go through every manual page by page. I recently bought a copy of the 1951 Moody off of Amazon. On page 1433, there’s a stock you could have made some money on. The EPS was $29 and the Price Range was from $3-$21/share. On another page, there is a company that had an EPS of $29.5 and the price range was $27-28, 1x earnings. You can get rich finding things like this, things that aren’t written about. Look through investment guide on Korean stocks.

Look for simple things that can't go wrong.
In your investing life you will have several opportunities and one or two that can’t go wrong. For example, in 1998 the NY fed offered a 30-year treasury bonds yielding less then the 29-½ year treasury bonds by 30 basis points, because Long Term Capital was trying to get out of a highly leveraged trade.

Warren Buffett said: "If you try to be a little smarter, you may end up a lot dumber." At Zenway.com, we stick to what is simple and understandable. Our Zen of investing is getting back to the basics, apply ancient tried-and-true mind development techniques, and focus on doing simple things extraordinarily well.

Brian Zen, CFA
http://www.zenway.com - from wisdom to wealth

I Build, I Dream, I Love, Anyway

You can spend your whole life building
Something from nothin'
One storm can come and blow it all away
Build it anyway

You can chase a dream
That seems so out of reach
And you know it might not ever come your way
Dream it anyway

God is great
But sometimes life ain't good
And when I pray
It doesn't always turn out like I think it should
But I do it anyway
Yea- I do it anyway

This world's gone crazy
It's hard to believe
That tomorrow will be better than today
Believe it anyway

You can love someone with all your heart
For all the right reasons
In a moment they can choose to walk away
Love 'em anyway

God is great
But sometimes life ain't good
And when I pray
It doesn't always turn out like I think it should
But I do it anyway
Yea - I do it anyway

You can pour your soul out singing
A song you believe in
That tomorrow they'll forget you ever sang
Sing it anyway
Yea, sing it anyway
Yeah, yeah!

I sing
I dream
I love anyway

A Dance That Moved Millions to Tears

Zen Lesson of the Day:
Never give up your dream! Even if you have lost your right arm or left leg, in real life, or in the stock market!


This award-winning dance is a miracle and a real life story of the life struggles of a dancer who lost her right arm and a man who lost his left leg.

The girl dancer, Ma Li, lost her dance career and boyfriend after she lost her right arm in a traffic accident. She tried to commit suicide at home. Fortunately the attempt was discovered by her parents. The whole family washed their faces with tears.

The boy dancer, Xi Xiao Wei, fell from a tree at the age of four, was ran over by a rural tractor over his left leg. He slept in a coma for seven days and nights. Upon waking up and feeling so hungry, while his father was trying to give him a lecture on setbacks in life, the boy asked: “Do setbacks taste good, papa?” Dad left the food on the table and walked out in tears while murmuring: “Setbacks taste good. You eat slowly, one by one, OK?”

The boy had no background in dancing and did not know how to hold his partner. During their rehearsals, the girl had to endure countless painful falls for endless days and nights...

And the end result is this dance of amazing grace and beauty that drove millions to tears all around the world.

THE LESSON

This is another testimonial that the biggest setback in life is often the unusual springboard to unprecedented success, just like what happens in the stock market. This fall down and rise up phenomenon is the manifestation of the cosmic force behind value investing: The Law of Yin-Yang. You always have the darkest night before the light of the day.

Therefore, success springs from painful setback and struggle. Failure murks from self-congratulation and arrogance.

Just as Benjamin Graham quoted: "Many shall be restored that now are fallen and many shall fall that now are in honor." (HORACE -- Ars Poetica.)

Brian Zen, CFA
http://www.zenway.com - from wisdom to wealth