{"id":411,"date":"2021-11-19T08:12:18","date_gmt":"2021-11-19T08:12:18","guid":{"rendered":"https:\/\/wordpress-596623-2274183.cloudwaysapps.com\/?p=411"},"modified":"2021-11-19T08:12:18","modified_gmt":"2021-11-19T08:12:18","slug":"why-imitating-warren-buffett-isnt-the-best-idea","status":"publish","type":"post","link":"https:\/\/www.thinkfinanceinc.com\/why-imitating-warren-buffett-isnt-the-best-idea\/","title":{"rendered":"Why imitating Warren Buffett isn\u2019t the Best Idea"},"content":{"rendered":"\n

Warren Buffett, the third wealthiest person on the planet as of\ntoday is considered the most successful investor in the world.<\/p>\n\n\n\n

However, while investing worked for Buffet, it doesn\u2019t mean it will work for you as well. That is, imitating Warren Buffett<\/strong><\/a> is not the key to riches.<\/p>\n\n\n\n

Why?<\/p>\n\n\n\n

Simply because Buffett has had many factors contributing to his\nsuccess. Some of these factors are:<\/p>\n\n\n\n

He has an above-average IQ and investing intuition. He began selling stuff and saving cash while he was still in school<\/strong><\/a>.<\/p>\n\n\n\n

He bought his first stock at the age of 11.<\/p>\n\n\n\n

He had Benjamin Graham as his finance teacher. Don\u2019t know\nBenjamin Graham? Well, he is known as the \u2018father of value investing\u2019 around\nthe globe.<\/p>\n\n\n\n

Try not to \u2018Invest like\nan Expert\u201d<\/strong><\/h2>\n\n\n\n

Well, most people tend to believe\nthat replicating an expert, like Mr. Buffett, will turn them into one. With\nthis article, I want to chuck that idea from your head. So, what exactly do I\nmean when I say an expert? By an expert, I mean the best investors in the world\n\u2013 like Warren Buffett.<\/p>\n\n\n\n

People like him are the ones who have actually understood how the economy works. They manage to beat the market with their extreme investing acumen.<\/p>\n\n\n\n

People like him are literally the\n*unicorns* of the financial world.<\/p>\n\n\n\n

Why you should\nduplicate the \u2018Experts\u2019<\/strong><\/h2>\n\n\n\n

1. Investing or Speculating is a Zero-Sum Game <\/strong><\/h4>\n\n\n\n

In layman terms, a zero-sum game is\na mathematical situation in which one party\u2019s gain is always equated by the other\nparty\u2019s loss.<\/p>\n\n\n\n

So, the stock market and speculating\nis a zero-sum game.<\/p>\n\n\n\n

Why?<\/p>\n\n\n\n

Since when you purchase a stock at a\nparticular value, another person is selling it at that equivalent cost. In the\nevent that you were right to buy, it would mean that they were wrong to sell\n(and vice versa).<\/p>\n\n\n\n

In this game of finance, for you to\nwin i.e. perform above average, someone else will have to perform worse.<\/p>\n\n\n\n

If the only people constantly\nperforming above than average are successful investors like Warren Buffett,\nthen that means someone is performing worse.<\/p>\n\n\n\n

Who is that someone? YOU.<\/p>\n\n\n\n

Therefore, you need to understand\nthat it\u2019s a game. You don\u2019t need to perform \u2018good, you need to perform\n\u2018better\u2019.<\/p>\n\n\n\n

2. All \u2018Unicorns\u2019 contribute in a Unique Way<\/strong><\/h4>\n\n\n\n

The key takeaway from their investing strategies shouldn\u2019t be\ntheir investment strategies, rather the point that they invest in a \u2018unique\u2019\nway.<\/p>\n\n\n\n

If you end up copying their investing strategy, you\u2019re\nbasically missing the whole point. <\/p>\n\n\n\n

If you are someone who believes that a book will guide you\nthrough the investing market, you\u2019re wrong. <\/p>\n\n\n\n

Why?<\/p>\n\n\n\n

For the simple reason that if everyone follows the same trick\nand \u2018wins\u2019, who will lose? Revisit the previous point once.<\/p>\n\n\n\n

3. They have been into Investing for a Looong Time<\/strong><\/h4>\n\n\n\n

All the \u2018unicorns\u2019 we are talking about have been into\ninvesting for a long time. For instance, Warren Buffett bought his first share\nat the age of 11!<\/p>\n\n\n\n

It\u2019s more of an obsession, passion than hard work.<\/p>\n\n\n\n

Obviously, they work hard. But why? Because they are obsessed.\nObsessed with winning.<\/p>\n\n\n\n

Winning at this financial game is not easy. There are thousands\nof people competing and aspiring to win. To become that one individual who wins\nand beats the market indeed requires experience and hard work.<\/p>\n\n\n\n

4. They have Identified Advantages  <\/strong><\/h4>\n\n\n\n

What is something these unicorns do that makes them stand apart\nin the market? How do they ALWAYS end up making a \u2018winning\u2019 decision?<\/p>\n\n\n\n

Well, they only tend to buy a share when they are 100% sure of\nany of these 3 things:<\/p>\n\n\n\n

  1. Advantage of Information:\nThey have some data\/information about the share\/company which others don\u2019t.<\/li>
  2. Advantage of Analytical\nSkills: They can analyze and predict the market in a way in which others can’t.<\/li>
  3. Advantage of Decision-Making:\nThey don\u2019t let emotions take over their logical decision-making process.<\/li><\/ol>\n\n\n\n

    It is only when the people who have made it big are sure of\npossessing either one of these that they proceed with buying\/selling\/trading.<\/p>\n\n\n\n

    Advantage of information provides a more concrete chance of\nsuccess than the advantage of analytical skills or the advantage of\ndecision-making.<\/p>\n\n\n\n

    In fact, the advantage of decision-making is the vaguest out of\nthe three.<\/p>\n\n\n\n

    Hence, big time investors prefer having either the advantage of\ninformation or the advantage of analytical skills.<\/p>\n\n\n\n

    5. They are probably just Lucky (?) <\/strong><\/h4>\n\n\n\n

    Some people believe that you cannot expect to make money by\ncopying unicorns because they are lucky.<\/p>\n\n\n\n

    While this may not be entirely true, it isn\u2019t entirely false as\nwell.<\/p>\n\n\n\n

    What is luck?<\/p>\n\n\n\n

    Opportunities. <\/p>\n\n\n\n

    To get exposure to shares and stocks and to have money to be\nable to buy a share at 11 is \u2018luck\u2019 for Warren Buffett.<\/p>\n\n\n\n

    Had this purchase not worked out in his favor, there is a\nchance that he might have not purchased a share again.<\/p>\n\n\n\n

    But guess what? His initial purchases worked for him. Not all\nof them must have worked, but a majority of them definitely did.<\/p>\n\n\n\n

    Therefore, there is no use in copying experts\u2019 strategies since\nyou can anyway not \u2018copy\u2019 their \u2018luck\u2019.<\/p>\n\n\n\n

    Things you can do to\nWin the Financial Game<\/strong><\/h2>\n\n\n\n

    So now that we have ruled out \u2018copying\u2019 big-time investors in\norder to up our financial game, let\u2019s talk about what we can actually do to up\nour financial game.<\/p>\n\n\n\n

    While obviously these points won\u2019t ensure that you win every\ntime at the zero-sum game, they would ensure that you become better than more\nthan 90% people competing.<\/p>\n\n\n\n

    When the market crashes, buy more<\/strong><\/p>\n\n\n\n

    The best time to buy shares is during market crashes<\/strong><\/a>.<\/p>\n\n\n\n

    Why?<\/p>\n\n\n\n

    Let\u2019s take a look at the concepts of\nsupport and resistance levels.<\/p>\n\n\n\n

    These two levels are boundaries\nwithin which a stock\u2019s price movement occurs.<\/p>\n\n\n\n

    Support level is the bottom most boundary whereas resistance\nlevel is the top most boundary. <\/p>\n\n\n\n

    These two levels suggest that a stock\u2019s price is not likely to\nfall below its support level and similarly, it\u2019s not likely to go beyond its\nresistance level. <\/p>\n\n\n\n

    When the price of a security reaches its support level, that is the bottom most level, it is considered an ideal time to buy that security. Similarly, if price goes beyond even the support level, there could not be a better time for purchasing that security.               <\/p>\n\n\n\n