Lessons from the master

But this isn't just a take on how the legendary investor's mind works or where's he's gone wrong. A stock picker himself, Janjigian, while outlining Buffett's methods, also looks at other ways to make money. In the process, he explains some basic rules of investing . For example, he discusses why it is important to have a diversified portfolio in order to reduce risk whereas Buffett didn't really believe in diversification, relying more on a concentrated portfolio; He, in fact, used to say that owning six companies was enough for those who knew what they were doing. However, as the author points out that for a man who professed that diversification wasn't so important, even Berkshire Hathaway today is far more diversified today than at any time in the company's history.

Buffett's long-term approach to investing is well documented: he has been known to say his favourite holding period is forever. But Janjigian says there is another approach that can be followed by less patient investors looking at a shorter time horizon, that can also be profitable, as can momentum investing. In fact, even Buffett has indulged in his share of relatively short-term trades though he believes in marrying the stock, a policy the author believes is not the appropriate strategy for everyone, saying investors should sell if they believe the market price exeeds the intrinsic value or if it consistently generates a poor return on capital. Buffett after all, has certain advantages over lay investors: he is able to negotiate deals and because of his sizable positions, he has far more control over the company and can revamp the management