"Kiss" - Keep It Simple, Stupid!-One of Warren Buffett's Keys to Success

Two of the biggest investors in history, Peter Lynch and Warren Buffett, are recognized by a trick that helped them develop investment records from 20% to 30% compounded over long periods of time. Buffett summed it up in the acronym "Kiss," which means "Keep it simple, stupid!" When you really understand what it means, can have major ramifications for his wallet and help give meaning to a turbulent market.

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The proof that these two men is applied is more or less the same. According to sources, Peter Lynch used to start an egg timer when the phone with financial analysts and operators to force them to explain the basic premise of an idea to invest in less than a minute. Buffett recommend that you write a brief paragraph saying something along the lines of, "I'm buying $ 10000 shares of the Company XYZ at $ 25 per share, because I think (insert here the reason as the profit will grow twice as quicker than the current price-to - revenue ratio, assets are hidden in the balance sheet, there was a management change for the better, the valuation is too low, etc.) then control the situation, always aware of their basic thesis. The practical result is meat or substance of his argument of the matter is separated from the water by a nonsense. Too often, stockbrokers and financial journalists spew tens of facts that have regurgitated for 10k or an annual report. Therefore, many facts obscure the really important figures such as sales growth, profit margins, anticipated capital expenditures, expected depreciation, and return on equity. Investors instead become bogged down in the reading of a $ 12 million transactions in a company generating $ 20 billion in sales. In a vast majority of cases, such information is not particularly relevant or necessary.

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Another big advantage of "Kiss" that is basic factor in probability theory in their decisions. What you do not have: a population that has a 65% change to double over the next five years or a population that has the potential to quadruple if eight different events taking place all (perhaps a business license in a new state, new factory built, etc.), each case has a 90% success rate likely? The latter, believe it or not, has an approximate 43% chance of becoming reality - much worse than contradicts the first option! With more links in a chain, has a greater probability of something going wrong. If a population could reach 1000%, but this, trade unions should drop the demand, the supply of fuel should collapse, a bankruptcy court should compel a competitor to pay their promised pension obligations, and new management to come to cut costs and stock option, will probably be disappointed.

How to Invest smartly in Stocks

I've noticed that many of my readers were searching for this basic question of how to buy stocks, so I thought it might be useful to you to synthesize some of the major content that has generated in recent years, putting in one easy to find and easy to use location for your convenience. This product is not designed to be autonomous. Instead, each of the important concepts have been shown live with a link to a fuller, richer of resources or article detailing the specifics of that issue.

How to Invest in Stock - The four major forms of Invest There are typically four main ways to invest:

1. Through a 401k plan or, if you work for a non-profit organization, a plan 403b
2. Through a Traditional IRA, Roth IRA, or SEP-IRA account
3. Through a brokerage account
4. Through a direct stock purchase plan or dividend reinvestment plan (drip)

How to invest in stock - The six types of assets that could itself In general, there are six types of assets for the average investor is likely that in his own life:

1. Populations common - owned enterprises
2. Preferred Stock - special types of stocks that often pay high dividends but have limited upside
3. Bonds - corporate bonds, municipal bonds, savings bonds, the U.S. government Treasury, etc.
4. Money markets - highly liquid funds that are designed to protect their purchasing power; considered a cash equivalent
5. Real estate investment funds or REITs - a special kind of company that designation does not allow the imposition within the company provided more than 90% of income has been paid to shareholders. The assets are often invested in a variety of real estate projects and property.
6. Mutual funds including exchange of goodwill, index funds and actively managed funds.

How to Invest in Stock - Doing Research

When the investigation of an investment normally there are five documents that wants to get your hands on research on the relative merits of a potential values:

1. The 10K - this is the annual filing with the Securities and Exchange Commission (SEC)
2. The most recent 10Q - this is the quarterly filing with the SEC
3. Proxy data - including information on the Board of Directors and management pay and shareholder proposals
4. The most recent annual report - read the report of the Chairman, CEO, CFO and, sometimes, or other high-ranking officials to see how they see the company. Not all annual reports are created equal. In general, the best in the business is considered a letter by Warren Buffett of Berkshire Hathaway, which can be downloaded for free on its corporate website.
5. One statistic that shows which dates back five or ten years. Several companies prepare such information, especially for a subscription, a Morningstar, Value Line, S & P and Moody's.

How to invest in stock - the three financial statements

There are three financial statements you will want to examine closely:

1. The income statement
2. The balance sheet
3. The cash flow statement