Warren Buffett explains how to become a successful value investor in his first TV interview in 1985. Despite it being recorded in 1985, his advice is just as relevant today for those learning how to invest in the stock market long term. Subscribe here for more content: http://bit.ly/SubscribeMichaelJay

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Here are the 7 lessons Warren Buffett explains on successful value investing and how to make money in the stock market:

1. Don’t lose money (the most important rule)
Instead of focusing on solely trying to find opportunities with high upside, look for the ones with limited downside. If you can find several of these opportunities, then while you might have a few that don’t work out, they won’t lose you much money and the winners can drive the performance of your portfolio.

2. Temperament is more important than intellect
The great thing about investing is that anyone can be successful. That is because your attitude is a much greater factor than your intellect in determining your long term performance. Ideally you want to be as objective as possible, looking at the facts, thinking logically, and not caring about what the crowd or market thinks. You wouldn’t be emotionally affected by a short term loss and similarly shouldn’t get too excited about a short term gain. But with a level-headed temperament you can re-evaluate the valuation of the stocks at that point and make an informed decision about what to do from that point forward.

3. Focus on the business, not the stock
Business performance should be the primary focus, because over time the stock will tend to follow the direction of company earnings. Once you have evaluated the business both in its current state and what you can reasonably expect it to be worth in the future, then you can look at the stock price and see if it is trading at a discount to what you think the underlying business is worth.

4. Tune out the noise
Much of the information you are exposed to does not have relevance to the long term performance of a business. This short term noise can distract from long term investment thinking. Take efforts to remove as much of this noise from your information diet as possible, so you can focus on the most important information relevant to valuing a business and determining an attractive price to pay for the stock.

5. Find your circle of competence
A circle of competence is the subject area which matches a person's skills or expertise. Use the knowledge that you do know to help make better informed decisions and evaluations of a company than the average investor. Peter Lynch also calls this finding an “edge”. What do you know that gives you an edge in investing? How does your long term perspective of the company differ from current short term perceptions? Be careful--you can easily break the first rule of investing by veering too far outside your circle of competence.

6. Wait for the right investment (pitch)
In investing, you don’t have to invest in anything if you are not comfortable. This gives you the option to wait until the right investment “pitch” comes along. You may see some investment opportunities today that appear reasonably attractive (say an estimated 8% expected annualized return). Those might be decent opportunities to invest in. Though you can choose to wait for even better investment options as well. The choice is yours, but don’t feel like you have to “swing” or invest, if there isn’t anything that appears worth the risk.

7. Successful value investing is simple, but not easy
If you want to be a successful long term investor, you don’t need complicated analytics and you certainly don’t need technical analysis or other indicators. Focus on the business first, understand it and what it is reasonably worth, and try to buy at a price below that. Value investing is simple, but not easy, as it requires both patience and temperament.


DISCLAIMER: This video is a resource for educational and general informational purposes and does not constitute actual financial advice. No one should make any investment decision without first consulting his or her own financial advisor and/or conducting his or her own research and due diligence. There is no guarantee or other promise as to any results that may be obtained from using this content. Investing of any kind involves risk and your investments may lose value.

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Michael Jay - Value Investing