Six traps investors should avoid

1) Anchoring trap. The mind gives a disproportionate amount of weight to the first information received on a topic. Avoid premature conclusions.

2) Status quo trap. Forecasts tend to perpetuate recent observations. If inflation has been high, it is expected to remain high. It is a psychological risk to assume something different.

3) Confirming evidence trap. Individuals give greater weight to information that supports an existing point of view. Run an idea by an independent-minded person. We tend to see evidence that supports what we believe to be true.

4) Overconfidence trap. Individuals overestimate the accuracy of their forecasts. Widening the range of expected possible outcomes is one way to mitigate this tendency.

5) Prudence trap. There is a tendency to temper forecasts that appear extreme. If a forecast turns out to be extreme and then wrong, it could be damaging to one's career. Therefore, sticking to the herd is safer.

6) Recallability trap. Individuals are overly influenced by events that have left a strong impression on a person's memory. These events tend to be catastrophic or dramatic. To avoid falling into this trap, individuals should ground their conclusions in objective data rather than emotion or memories.

Great
Source: Morningstar.com. [Original article here]

Warren Buffett Holdings as of September 2009

This is the list of Berkshire Hathaway Inc. (NYSE: BRK-A)(BRK-B) public US equity holdings as of September 30, 2009.

 

 

 

Highlights from the portfolio of the greatest investor of our time.

• American Express Co. (NYSE: AXP) over 151.6 million shares, same as last quarter.
• Bank of America Corp. (NYSE: BAC) 5 million shares; same as last quarter.
• Becton Dickinson & Co. (NYSE: BDX) 1.2 million shares, same as last quarter.
• Burlington Northern Santa Fe (NYSE: BNI) was reported as 76.77 million shares but frankly it does not really matter as BNSF is becoming part of Berkshire.
• Carmax Inc. (NYSE: KMX) 9 million shares is same as last quarter.
• Coca Cola Co. (NYSE: KO) right at 200 million shares, still same as before.
• Comcast (NASDAQ: CMCSA) 12 million shares, same as before.
• Comdisco Holdings (NASDAQ: CDCO) roughly 1.5 million shares, same as before.
• ConocoPhillips (NYSE: COP) 57.43 million shares, DOWN FROM 62.485 million at the end of June.
• Costco Wholesale (NASDAQ: COST) 5.254 million shares, same as before.
• Exxon Mobil Corp. (NYSE: XOM) is a NEW HOLDING of 1.276 million shares.
• Gannett Co. (NYSE: GCI) 3.447 million shares, same as before.
• General Electric Corp. (NYSE: GE) 7.777 million shares is the same as before, but does not include the huge preferred investment from late 2008.
• GlaxoSmithKline (NYSE: GSK) 1.51 million shares, same as before.
• Home Depot Inc. (NYSE: HD) 2.757 million, same as last quarter.
• Ingersoll-Rand (NYSE: IR) 636,600 shares; WAY DOWN from the 7.78 million listed last quarter.
• Iron Mountain (NYSE: IRM) 3.3722 million shares, same as before.
• Johnson & Johnson (NYSE: JNJ) was just over 36.91 million shares; Same as last quarter and still well under the 62 million shares at one point in 2008.
• Kraft Foods (NYSE: KFT) over 138 million; same as last quarter.
• Lowe’s Companies (NYSE: LOW) 6.5 million shares, same as last quarter.
• M&T Bank Corp. (NYSE: MTB) 6.71 million shares, same as before.
• Moody’s (NYSE: MCO) was listed as over 39.2 million shares, but that is WAY DOWN from the 48 million last quarter.  Be advised that he has noted sales and hinted at more sales here.
• Nalco Holding (NYSE: NLC) 9.0 million shares, same as last quarter.
• Nike Inc. (NYSE: NKE) 7.641 million shares, same as before.
• Norfolk Southern (NYSE: NSC) 1.933 million shares, same as before, but we already know Buffett has or is selling out of non-BNSF shares in rail companies.
• NRG Energy (NYSE: NRG) 7.2 million, same as before.
• Eaton Corp. (NYSE: ETN) was NOT LISTED ANY LONGER, so sold from holdings.
• Procter & Gamble (NYSE: PG) 96.3 million, the same as before.
• Republic Services Inc. (NYSE: RSG) 3.625 million shares; NEW POSITION following Bill Gates.
• Sanofi Aventis (NYSE: SNY) more than 3.9 million shares, same as before.
• Sun Trust Bank (NYSE: STI) 3.079 million shares; DOWN FROM 3.2+ the quarter before.
• Torchmark Corp. (NYSE: TMK) roughly 2.82 million, same as before.
• Travelers Cos (NYSE: TRV) 27,336; NEW POSITION but small.
• US Bancorp (NYSE: USB) roughly 69 million; Same as quarter before.
• USG Corp. (NYSE: USG) 17.072 million shares, same as before.
• United Health Group (NYSE: UNH) 3.4 million shares; DOWN from 4.5 million last quarter and down from over 6 million in Q1.
• Union Pacific Corp. (NYSE: UNP) 9.55 million shares, same as quarter before but this does not matter as Buffett is dumping his non-BNSF rail holdings.
• United Parcel Service (NYSE: UPS) 1.429 million shares, same as before.
• Wal-Mart Stores Inc. (NYSE: WMT) 37.8 million; WAY UP from the 19.9+ million shares last quarter.
• Washington Post (NYSE: WPO) over 1.72 million shares, same as before.
• Wells Fargo & Co. (NYSE: WFC) 313.3 million shares; ABOVE THE PRIOR 302+ million last quarter and above the 290+ million in Q1.
• Wellpoint Inc. (NYSE: WLP) 3.394 million; DOWN SLIGHTLY from the 3.5 million last quarter and from the 4.7773 million in Q1.
• Wesco Financial Corp. (NYSE: WSC) 5.7 million shares, same as before.
• WABCO Holdings (NYSE: WBC) IS GONE after being 2.7 million shares last quarter.

401k tips

During this difficult period, I have come across several of my young colleagues who have switched much of their 401k or 403b plans to bonds. When I say "young", these people have 25+ years to retirement at least. This is fundamentally a bad idea because those who do not intend to take out their money early and accept the huge penalty (10%), have nothing to worry about and should be concentrated in stocks. Now is the time where equities are very cheap, so you will actually be purchasing units at a very low price. When this downturn is over, and I do not know when that will be but I do believe it will eventually happen, you will fully benefit from the market recovery. Please do your research on this very important and seek the best financial advice for your personal situation.

One piece of advice that John Bogle, the founder of the Vanguard Group, says is that your percentage investments in bonds should be equivalent to your age. For example, if you are 25 years old, you should have 25% in bonds and the remainder in stocks. This is a basic yardstick to use if you are not the sophisticated investor or ignorant of how investments work.

Read more here...

General Investing Questions Answered

This site by Dan Solin answers some very basic investing questions people have, and he does it "very candidly" as he put it. Don't take offense to any thing, just open up your mind to the ideas. They are actually some very good comments. Enjoy!!

Read more here...