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    These 5 mantras from Warren Buffett, Benjamin Graham can make you a millionaire

    Synopsis

    If you follow a disciplined approach, stay with quality companies and invest on dips, long-term gains can help you hit the jackpot.

    ETMarkets.com
    NEW DELHI: Making money in the equity market is never easy, more so at a time when the developed markets are in distress. But if you follow a disciplined approach, stay with quality companies and invest on dips, long-term gains can help you script a millionaire dream.

    Following a disciplined approach and sticking to the basic principles of investing can add glitter a portfolio, especially in times when others tend to run away from the equity market.

    Who is better to learn these principles from than market gurus Warren Buffet and Benjamin Graham.

    Speaking at the Morningstar Investment Conference in Mumbai, Chris Galloway of Morningstar highlighted the investment principles from legendary investors like Warren Buffet and Benjamin Graham and how investors can use them to create wealth.

    If one would have invested $10,000 in Berkshire Hathaway back in 1965, it would be worth $50 million today, Galloway said.

    So, what are those thumb rules of disciplined wealth creation?

    Buying quality merchandise: Warren Buffett likes buying quality merchandise (stocks) when it is marked down.

    “If we look at Warren Buffett's approach to investing – he talked about finding good companies with great management and his best holding period is actually forever,” Galloway said.

    "How you want to invest, whether it is passive or active or whether is it in mutual funds or direct equity, you need to really have a set of principles to form the foundation of your behaviour,” he said.

    Investing in value: Benjamin Graham is known as the father of value investing. He focussed on companies or businesses when they were trading below their intrinsic values, had high dividend yields and low PE multiples but had tremendous potential for the future.

    The wealth creation process could take time if one uses this principle, but the growth could be exponential. The discount of the market price to the intrinsic value is what Benjamin Graham called the ‘margin of safety’.

    "If we go back to Benjamin Graham, who wrote the book on how to be a value investor, he speaks about very simple concepts,” Galloway said. However, the task of identifying the underlying value is never an easy one.

    Graham talks about buying a company when the price is actually below intrinsic value. However, the most difficult thing for most investors is to actually stick to that behaviour. But that is exactly what good investors do.

    Be fearful when others are greedy: It is tough to stand firm when the market takes a big knock or have the courage to buy when stocks keep falling like ninepins. But if the fundamentals of a company remain intact, investors should not be scared to dip into quality stocks, experts said.

    Only Black Swan events provide this kind of opportunity, which can create tremendous wealth for investors. This is possible if only one can invest in the market in a disciplined way.

    “Investors should avoid herd mentality. They do not want to invest when best opportunities are actually found. You think about the GFC, a big correction, a big fall in asset price, yet most investors did not want to buy," Galloway said.

    "That was one of the best buying opportunities we have seen in many decades. As Buffett would often say, “one should be fearful when others are greedy and greedy when others are fearful. That is the secret of making money or getting rich,” he said.

    Not to lose money: It might be hard to implement this rule, especially at a time when everything around you keeps falling. Investing means putting money to work for a longer period and while doing that investors should not forget Warren Buffett’s two rules of investment.

    Rule No.1 is, never lose money. Rule No.2 is never forget rule number one.

    Great businesses can remain overvalued, but do not buy: There is no denying the fact that great businesses can trade at a higher multiples in the long term as well. Would that be a good investment?

    If investors pay for future growth today, then there would not be much upside left. Hence, investors should avoid herd mentality here.

    “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well,” Buffett often said.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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