Do not be fooled by Buffett's fame

If any investment guru's reputation has not been damaged in the financial crisis, he is Warren Buffett. While countless investors were brought down in the financial storm, Buffett still carries on his legend, and sets off round after round of "Buffett fever."

For ordinary investors, perhaps Buffett's greatest appeal lies in his power to find profitable shares. Facts have proved that almost all of Buffett's investment or favorite stocks and sectors have impressive performance, which makes many investors have deep admiration and trust in him. This then evolved into a frenzied inference: anything related to Buffett will not be bad.

This inference has been given the best validation in the Chinese market. The news of Buffett's investment in BYD pushed Wang Chuanfu to be China's richest man. Buffett's congratulations to Trands doubled its stock price. Last week, Buffett announced the acquisition of the largest U.S. railroad operator, and China's railway transportation-related stocks were all affected. Buffett's every move has become a beacon for Chinese investors.

After rounds of "miracles" cooling down, it's not difficult to find such short-term speculation, in fact, is contrary to Buffett's investment philosophy. In Buffett's view, the short-term trading is just a waste of time and money, and will also affect the operating result. He often warned investors that "if you are not sure you can hold any stock for 10 years, then you do not need to consider being a holder even for 10 minutes.''

Buffett bought the Washington Post's shares in 1972 with 10.6 million U.S. dollars, and the stock in 1999 had already risen to 9.3 billion U.S. dollars, growing 86-fold. Although during these 27 years, the Washington Post shares experienced ups and downs, "long-term strategy and patience" eventually brought considerable gains to Buffett.

However, the value of investment does not mean merely being a long-term shareholder, Buffett also stressed that the real essence of investment is we must carefully understand the company's products, financial condition, management, growth potential and even potential competitors, in other words, is to have the state of mind of the company's leader to choose and hold this stock.

In November 1974, Buffett advised the public to purchase U.S. shares for the first time. Within one month the Dow Jones index fell 577.60 points, followed by a round of bull market. The most recent one was in October 2008, Buffett wrote, Buy American, I Am for New York Times, showing his attitude in the deepest financial crisis. Five months later, the global stock markets began to rebound. Historical experience shows that Buffett's judgments for the top and bottom are usually a few months to half a year earlier than the market.

The Buffett concept had brought infinite imagination, and has become greater. However, we must see behind that crazy hype, there must be hidden manipulation of certain interest groups. The dazzling Buffett fame is likely to block investors from seeing the real situation. Those who really want to "emulate" the success of Buffett should always maintain a rational mind, and truly understand and master the market trends.

By People's Daily Online