“Anytime you invest, you have expectation.” – TD Jakes

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Since I started this blog, my senses have been heightened to find any information to help the normal guy on main street succeed by teaching financial principles. It is very gratifying to be in such a receptive head space that I find inspiration from the unlikeliest of sources. Last night, I found inspiration on CNBC’s American Greed, a show that I have been watching faithfully for years. It is like soft porn to a seasoned CPA like me. Each episode tells the story of unwitting investors losing their hard-earned money to scoundrels and crooks. Last night was no exception. I watched in angst as several elderly people gave away their life savings to invest in a pipe dream. This lesson is to teach you how to spot an unscrupulous investment opportunity based on advice from the most famous investor of all time, Mr. Warren Buffett.

Education:

The Buffett Philosophy

I love Warren Buffett! There, I said it! No really…I love this down-to-earth, investing genius who teaches by living. In Lesson #26, I assigned a video of him speaking about his investment philosophy and how he makes money. Since American Greed shows no signs of airing its last episode, you would be wise to listen to sound advice for the legend himself.

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  1. “Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1.”
  2. “Never invest in a business you cannot understand.”
  3. “Always invest for the long term.”
  4. “Buy a business, don’t rent stocks.”
  5. “If you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes.”
  6. “Price is what you pay. Value is what you get.”
  7. “By periodically investing in an index fund, the know-nothing investors can actually outperform most investment professionals.”
  8. “Investing is laying out money now to get more money back in the future.”
  9. “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”
  10. “For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.”
  11. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
  12. “Why not invest your assets in the companies you really like? As Mae West said, ‘Too much of a good thing can be wonderful.”
  13. “The most important thing to do if you find yourself in a hole is to stop digging.”
  14. “Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”
  15. “I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that …I’m paying $32 billion today for the Coca Cola Company because… If you can’t answer that question, you shouldn’t buy it. If you can answer that question, and you do it a few times, you’ll make a lot of money.“

Stay within your circle of confidence. “ – Warren Buffett

Resources:

Important term!s from this lesson:

Term Definition
Investment Philosopy A set of guiding principles that inform and shape an individual’s investment decision-making process.

 Action Step:       Watch and Learn – Billionaire Investing Secrets

http://www.youtube.com/watch?v=NizR0KXjhhM