How to Invest

May 4, 2012

Is this your ROI?So, you want to maximize the returns on your long-term investments from the companies you are invested in. You probably figured out Warren Buffett’s investment strategy already, and know how he makes money when the economy goes down. In case you haven’t, here it is:

In an open letter to shareholders, Buffett measured the intrinsic value of his business according to its book value, which is what its shareholders would get if it was liquidated. He is famously quoted for saying, “I buy on the assumption that they could close the market the next day and not open for 10 years.” So, he made money when markets went down. His fortune may not lie at the bottom of the pyramid, but it’s apparently closer to the ground.

Now that you know his strategy, can you guarantee that you are safe from all the ups and downs in the markets you are invested in? Are you sure you are taking the right decisions every time and everywhere about why, how and what to invest?

First of all, three simple steps to decision-making will make you safer:

1. Don’t decide until you have to.
2. The more important the decision, the more people you involve and the more time you spend on it.
3. Mutually agree on how the decision will be reversed, and prepare for it.

The last step seems counter-intuitive. To understand it, answer this: Did you ever eat your words when your boss raised and challenged assumptions you hadn’t considered? If not your boss, it could have been someone who wasn’t present in the meeting when the decision was made. If you did, had you prepared for it beforehand?

Your corporate vision is something that the world cannot achieve without your company. To know your vision, simply ask yourself, “What will the world be unable to gain after five years if I shut down my business right now?”