Oracle of Omaha offers words of wisdom, by Georgina Russell

When asked how he felt about Joel Greenblatt’s recent bestseller, “The Little Book that Beats the Market,” Warren Buffett said “I agree with buying good companies cheap.” Sounds simple, but he also gave us a well-known framework for doing it - a Benjamin Graham three-point mantra, so to speak:

1) A stock is a piece of a business. If you don’t want to own the business don’t buy the stock
2) The Market is there to serve you not to instruct. The market is a psychotic, drunk, manic depressive selling 4,000 companies everyday. “If you buy a farm, you look to the farm to determine the value of your interest, not to some guy coming by giving you a quote everyday.”
3) Know your “Margin of Safety” with every investment.

That too, doesn’t seem so difficult. So what’s the catch? After hearing it over and over again, you realize it’s not being able to say 1, 2, and 3, but to recognize and act on them by identifying businesses you want to own, realizing when the market is and isn’t your friend, and knowing how to calculate your margin of safety.

– via vinvesting.com –