A Lesson From The Grandfather of Warren Buffett

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Take a minute and read this letter in its entirety. I promise you won’t regret it. It is a letter written from Ernest Buffett (Warren’s grandpa) to his son Fred (Warren’s uncle) in 1939:

Dear Fred & Catherine:

Over a period of a good many years I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash. I have known people who have had to sacrifice some of their holdings in order to have money that was necessary at that time.

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Originally posted 2013-06-06 11:59:42.

Why Dairy Queen Franchises Lead To Riches

With the exception of McDonald’s, Dairy Queen franchisees have quietly amassed the most substantial wealth out of any food franchise that operates at more than 1,000 locations in the United States.

It has been intriguing to study how much Warren Buffett chose to emulate Ray Kroc’s early years at McDonald’s in drafting the incentive systems that exist at Dairy Queen. Instead of opting to build wealth at the expense of franchisees, Buffett chose to build wealth by giving his franchisees a chance to reap significant gains for themselves. In other words, instead of trying to extract as much as he could from a fixed pie, Buffett chose to create a incentives that encourages Dairy Queen franchisees to expand the size of the pie as much as possible.

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Stop Market Timing and Start Dividend Investing

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Often enough, you will hear from conventional financial planners that quickly entering and exiting certain stock market investments has the realistic possibility of being a futile endeavor, and usually the explanation “why” simply focuses on the fact that stock market prices are fickle in the short term and can take years and years to correctly reflect the value of the enterprise you have in mind. That’s absolutely part of the equation, but there is more to it than that: almost all of the stock market’s gains come in very short bursts that are wildly unpredictable.

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Originally posted 2013-06-06 09:00:05.

Visa Stock’s Investment Returns Through 2028

From a pure business dominance perspective, I can think of few businesses in the history of Western Civilization that have created a better combination of ubiquity and high growth than the e-payment network giant Visa (V). Companies that receive payments, which are loathe to pay out fees for each transaction, have little choice but to gin up and bear it because customers avail themselves of making purchases with either Visa, Mastercard, American Express, Discover, a debit card, a store card/private label card, or cash.

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Be Happy When Stock Prices Fall (Really)

Here is a quick overview of today’s movements in the stocks I “follow” on my Seeking Alpha homepage:

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As you can see, the price of every single company that I follow went down today. For some people that try to buy a stock at $30 and sell it at $70, that is bad news. It means they are losing money.

But if you craft a long-term strategy and think like a business owner, you will develop the kind of wiring that appreciates falling stocks because it matches your goals. When I invest, I am trying to buy the most future profits (in the form of dividends and retained earnings) at the lowest price I can, adjusted for risk. I make an exception here and there to DRIP into a high quality stock, or set aside 3-5% of the portfolio for speculation, but aside from those two exceptions, that’s what I’m about.

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Originally posted 2013-06-05 22:34:28.