Tag Archives: Warren Buffet

How I used the Buffet 25 strategy to Walk the Talk

Bob Marley poet and a prophet; Bob Marley walkin’ like he talk it. – Red Hot Chili Peppers  

One day I was reading an article online. It was about Warren Buffet, the most successful investor of all-time, so I had to stop and read it. Glad I did. 

In the article, it discusses how Buffet was speaking to the pilot of a plane and asked the man why he still works for him instead of doing what he wants to do.  

The pilot stated he had lots of goals and dreams but no time to focus; therein lies the rub. 

Buffet then suggested his strategy of writing down 25 things you want to accomplish.  

The trick is to circle the top five most important things to you. These are the things you should focus on.  

What about the others? Forget them. Only put your time, energy, and attention on the tasks that are truly in your heart. These are what you will put your best efforts into anyway. Now you have solved the crux of the problem: too many distractions.  

If you want to be successful, then you have to focus.  

It is best to focus your energy on one thing. 

Instead of too many eggs and not enough baskets.   

After reading this article, I did my own list of 25.  

I circled five things that were really important to me.  

This is how this blog came to pass.  

I stopped focusing on doing twenty things and narrowed my focus to five. I became so much more productive and decreased my stress at the same time.  

I increased my productivity tenfold. Instead of trying to find time to write one article, I now had more than enough time to write 10.  

I had been saying for years I need to write a book or teach a class on finance. I was so fed up with reading so much and realizing I had known so little. I wanted to share my new knowledge.  

Well then I decided to write a blog. I remembered reading another blogger who had written a post called how to start a blog. The rest as they say is history.  

All your investment eggs in one basket

It’s okay to keep all your investment eggs in one basket or even a jar.

“Keep all your eggs in one basket, but watch that basket closely.” -Warren Buffet

Below are some of the most common things I have heard while learning to invest.

Do not keep all your eggs in one basket. Diversify your investment. Diversification is for people who do not know what they are doing.

It is nearly impossible to make a decision with all that back and forth. It’s like a financial tug of war. I got tired of the tennis match. No more ping-ponging. You have to pick a path. You finally have to ask yourself, which one is it?

Basically, it’s okay to keep all your eggs in one basket. As long as you watch over it.

A simple method to use is a split one. If you have $1,000 to invest and cannot decide among four investments, then put 25% into each of them.

The one that tanks over a three to five-year period you can just jump ship or hedge your bets by only limiting what you invest. Just decrease your exposure to risk by selling the entire investment or reducing your investment amount to say 12.5 percent.

For example, you decide to invest in Apple. You like to products. You also like 10 other tech stocks. However, instead of diversifying you place your funds into one stock: Apple.

Wait. Let’s back the truck up.

Please note, that first you must decide on your risk tolerance. This is based on what you can afford to reasonably lose because as they say if you can’t afford to lose it, then you can’t afford to have it.

You may decide you can only afford to lose $100. This is your risk level. Anything past this means stop. Do not pass go. Do not collect $200. Or in this case, do not invest $200.

You may have inherited $5,000. Nice windfall. You decide that you are willing to invest $1,500.

Now let’s get back to Apple.

You place all your bets on one stock. That’s it. Now all you do is watch over it. You may set a time horizon of say three years to see an increase of five percent or more.

If this is not the case, then you can sell some or all of your investment and move on.

Either cut your losses or be ready to possibly lose more.

I’m the kind of person who’s comfortable carrying low-interest, tax-deductible debt for 10-20 years. It doesn’t phase me. I sleep just fine.

No matter what: you made a decision. You pulled the trigger. Life like investments cannot be all theory and no practice. People tend to aim, aim, aim….

I think you get the point.