Details

<p>Preface xv</p> <p>Acknowledgments xix</p> <p><b>Chapter 1: Who Is Warren Buffett? 1</b></p> <p>Introduction 1</p> <p>Buffett the Teen 2</p> <p>Who Are We to Write This Book? 3</p> <p>What Is Financial Literacy and Why Does It Matter? 4</p> <p>Some Fundamental Buffett “Tips” 5</p> <p>Buffett’s Work Ethic 7</p> <p>Buffett Has Spent a Lifetime Learning 8</p> <p>Why Is Buffett Happy? 10</p> <p>Improve Your Communication Skills and See Your Lifetime Earnings Increase 50% 12</p> <p>Acting with Integrity Is the Right Thing to Do and Good for Business 13</p> <p>Buy Low, Sell High 14</p> <p>Buffett Doesn’t Succumb to Peer Pressure: The Inner Scorecard 15</p> <p>Buffett’s Fallback Career—Comedian 17</p> <p>Buffett’s Lasting Legacy: Philanthropy 18</p> <p>Buffett’s Tips from Chapter 1 19</p> <p>References 20</p> <p><b>Chapter 2: Investment Fundamentals According to Buffett 23</b></p> <p>Introduction 23</p> <p>The “Miracle of Compound Interest” Explained 24</p> <p>Trade-Offs: A Fundamental Principle of Life 27</p> <p>The Saint Petersburg Paradox: A Lesson on Risk and Return 29</p> <p>Risk and Return: The Evidence 30</p> <p>Diversification: One of the Few Free Lunches in Life 32</p> <p>Supply and Demand Determine Price 33</p> <p>Summary on Financial Fundamentals 35</p> <p>Buffett’s Tips from Chapter 2 36</p> <p>References 36</p> <p><b>Chapter 3: Bank Accounts, Debit Cards, Credit Cards, and Your Credit Score 38</b></p> <p>Introduction 38</p> <p>Insured Bank Deposits 38</p> <p>Savings Accounts and Certificates of Deposit (CD) 40</p> <p>Checking Accounts and Electronic Bill Payment 42</p> <p>Parts of a Check 43</p> <p>Balancing a Checkbook 44</p> <p>Debit Cards and Automated Teller Machines (ATM) 45</p> <p>Credit Cards and Charge Cards 46</p> <p>Apps to Send Money: PayPal, Venmo, Zelle, Apple Pay, Android Pay, and so forth 49</p> <p>Your Credit Score: A Report Card of Your Financial Responsibility 50</p> <p>Personal Bankruptcy: Try to Avoid at all Costs 52</p> <p>A Word on Bitcoin from Buffett 53</p> <p>Buffett’s Tips from Chapter 3 56</p> <p>References 56</p> <p><b>Chapter 4: Bonds and Inflation 58</b></p> <p>Introduction 58</p> <p>US Savings Bonds 59</p> <p>Other US Treasury Fixed Income Securities 60</p> <p>Inflation and the Consumer Price Index (CPI) 62</p> <p>Bond Ratings and Corporate Bankruptcy 63</p> <p>Corporate Bonds, Municipal Bonds, and Bowie Bonds 65</p> <p>Bowie Bonds and Other Asset-Backed Securities 66</p> <p>The Federal Reserve: The Central Bank of the United States 67</p> <p>What Determines Interest Rates? 69</p> <p>Intuition on Estimating the Price of a Bond 70</p> <p>So Are Bonds Good Investments? 72</p> <p>A Note on Negative Bond Yields 73</p> <p>Appendix: Bond Valuation 74</p> <p>Buffett’s Tips from Chapter 4 75</p> <p>References 75</p> <p><b>Chapter 5: Stock Market Fundamentals 77</b></p> <p>Introduction 77</p> <p>Initial Public Offerings (IPOs): The Birth of a Stock 78</p> <p>Investment Banks and Investment Bankers 78</p> <p>The Main Event: The Stock Begins Trading on the Exchange 80</p> <p>The Stock Exchange 81</p> <p>A Sidebar on Stock and Mutual Fund Symbols 83</p> <p>Dividends 84</p> <p>Large Cap vs. Small Cap 87</p> <p>Growth vs. Value 88</p> <p>Domestic vs. International 90</p> <p>An Index Fund: A Great “Set It and Forget It” Long-Run Investment 91</p> <p>Beating the Market and the Efficient Market Hypothesis 92</p> <p>Meet Mr. Market, the Manic-Depressive Stock Market 94</p> <p>Buffett’s Tips from Chapter 5 96</p> <p>Appendix: Selling Short (or the “Don’t Try This at Home” Area of Investing) 96</p> <p>References 98</p> <p><b>Chapter 6: Buffett’s Approach to Stocks 100</b></p> <p>Introduction 100</p> <p>Estimating the Value of a Stock 101</p> <p>Getting a Price Target with the Discounted Cash Flow Model 101</p> <p>Getting a Price Target with the Wall Street P/E Model 103</p> <p>Buffett’s Approach to Stocks 105</p> <p>Getting into the Buffett Mindset on Investing 105</p> <p>Stay within Your Circle of Competence 106</p> <p>The Importance of Being Patient 107</p> <p>Good vs. Bad Companies and the Passage of Time 107</p> <p>How Buffett Thinks About Change in an Industry 109</p> <p>Types of Businesses Buffett Likes 110</p> <p>Demonstrated Consistent Earnings Power 111</p> <p>Look for Companies with Good Management 112</p> <p>Buy Companies That Have the Power to Overcome Inflation 113</p> <p>Focus on Firms with Favorable Long-Term Prospects 115</p> <p>When to Sell 117</p> <p>Summarizing Buffett’s Approach 118</p> <p>Buffett’s Tips from Chapter 6 119</p> <p>References 120</p> <p><b>Chapter 7: Accounting Fundamentals: The Report Card for Businesses 122</b></p> <p>Introduction 122</p> <p>The Income Statement: A Company’s Report Card for One Period 124</p> <p>Apple’s Income Statement 125</p> <p>The Balance Sheet: A Picture of a Company’s Report Card Since Inception 129</p> <p>Current Assets 131</p> <p>Long-Term Assets 132</p> <p>Liabilities 134</p> <p>Current Liabilities 134</p> <p>Long-Term Liabilities 134</p> <p>Stockholders’ Equity 135</p> <p>A Quick Note on the Statement of Cash Flows 137</p> <p>Summary 138</p> <p>Buffett’s Tips from Chapter 7 139</p> <p>References 139</p> <p><b>Chapter 8: Buffett’s Approach to Portfolio and Risk Management 141</b></p> <p>Introduction 141</p> <p>The Key to Selecting a Well-Diversified Portfolio: Correlation 142</p> <p>A (Theoretical) Portfolio with No Risk 143</p> <p>Selecting an Optimal Diversified Portfolio: The “Business School” Approach 144</p> <p>Buffett’s First Approach to Portfolio Selection: Index Funds 147</p> <p>Buffett’s Second Approach to Portfolio Selection: Expert Mode 147</p> <p>A Compromise Solution to Portfolio Selection 149</p> <p>How Many Stocks Make a Diversified Portfolio? 150</p> <p>The “Business School” Approach to Risk 151</p> <p>Buffett’s Critique of the Business School Approach to Risk 153</p> <p>Buffett’s Approach to Risk 154</p> <p>Buffett on Gold 155</p> <p>Summarizing Buffett’s Views on Risk 157</p> <p>Endnote on CAPM 157</p> <p>Buffett’s Tips from Chapter 8 158</p> <p>References 158</p> <p><b>Chapter 9: Business 101: Companies You Should Know 160</b></p> <p>Introduction 160</p> <p>The Dow Jones Industrial Average: The Oldest Diversified US Stock Market Index 161</p> <p>How the Dow Is Calculated 162</p> <p>An Explanation of Stock Splits 164</p> <p>Different Share Classes and Buffett on Stock Splits 166</p> <p>Current Stocks in the Dow Jones Industrial Average 167</p> <p>Materials Stocks in the Dow 168</p> <p>Chevron (NYSE: CVX) 168</p> <p>Dow Chemical (NYSE: DOW) 168</p> <p>Consumer and Business Services Stocks in the Dow 169</p> <p>Home Depot (NYSE: HD) 169</p> <p>McDonald’s (NYSE: MCD) 169</p> <p>Walmart (NYSE: WMT) 170</p> <p>Consumer Goods Stocks in the Dow 170</p> <p>Apple (NASDAQ: AAPL) 171</p> <p>Coca-Cola (NYSE: KO) 171</p> <p>Nike (NYSE: NKE) 172</p> <p>Procter & Gamble (NYSE: PG) 173</p> <p>Walgreens Boots Alliance (NASDAQ: WBA) 173</p> <p>Walt Disney (NYSE: DIS) 173</p> <p>Financial Stocks in the Dow 173</p> <p>American Express (NYSE: AXP) 174</p> <p>Goldman Sachs (NYSE: GS) 174</p> <p>JPMorgan Chase & Co. (NYSE: JPM) 174</p> <p>Travelers (NYSE: TRV) 175</p> <p>Visa (NYSE: V) 175</p> <p>Health Care Stocks in the Dow 175</p> <p>Amgen (NASDAQ: AMGN) 175</p> <p>Johnson & Johnson (NYSE: JNJ) 176</p> <p>Merck & Co. (NYSE: MRK) 176</p> <p>UnitedHealth Group (NYSE: UNH) 176</p> <p>Industrial Goods Stocks in the Dow 177</p> <p>Boeing (NYSE: BA) 177</p> <p>Caterpillar (NYSE: CAT) 177</p> <p>Honeywell (NYSE: HON) 177</p> <p>3M Company (NYSE: MMM) 178</p> <p>Technology Stocks in the Dow 178</p> <p>Intel (NASDAQ: INTC) 178</p> <p>International Business Machines (NYSE: IBM) 179</p> <p>Microsoft (NASDAQ: MSFT) 179</p> <p>salesforce.com (NASDAQ: CRM) 180</p> <p>Telecommunications Services Stocks in the Dow 180</p> <p>Cisco Systems (NASDAQ: CSCO) 180</p> <p>Verizon (NYSE: VZ) 181</p> <p>Some Blue-Chip US Stocks That Aren’t in the Dow 181</p> <p>The FANG Stocks—They Don’t Bite 181</p> <p>China’s Emerging Titans 183</p> <p>Some International Energy Titans 183</p> <p>Some Global Consumer Titans 184</p> <p>Some Global Financial Service Firms 185</p> <p>Buffett’s Tips from Chapter 9 185</p> <p>References 186</p> <p><b>Chapter 10: Business 101—Past and Present Business Leaders, or Who’s Who in Business 187</b></p> <p>Introduction 187</p> <p>Past Business Leaders 188</p> <p><i>Rose Blumkin (Mrs. B)</i> 188</p> <p><i>Andrew Carnegie</i> 189</p> <p><i>Walt Disney</i> 189</p> <p><i>Thomas Edison and Jack Welch</i> 189</p> <p><i>Henry Ford</i> 190</p> <p><i>Katharine Graham</i> 190</p> <p><i>William Randolph Hearst</i> 190</p> <p><i>Steve Jobs</i> 191</p> <p><i>Ingvar Kamprad</i> 191</p> <p><i>Ray Kroc</i> 192</p> <p><i>Estee Lauder</i> 192</p> <p><i>J.P. Morgan</i> 192</p> <p><i>John D. Rockefeller</i> 193</p> <p><i>Cornelius Vanderbilt</i> 194</p> <p><i>Sam Walton</i> 194</p> <p><i>Thomas Watson Jr</i>. 195</p> <p>Present Business Leaders 195</p> <p><i>Bernard Arnault</i> 196</p> <p><i>Mary Barra</i> 196</p> <p><i>Jeff Bezos</i> 197</p> <p><i>Richard Branson</i> 198</p> <p><i>Michael Bloomberg</i> 198</p> <p><i>Sergey Brin, Larry Page, and Sundar Pichai </i>199</p> <p><i>Shawn Carter, Beyoncé Knowles, Sean Combs, and Andre Young</i> 200</p> <p><i>Tim Cook</i> 200</p> <p><i>Jamie Dimon</i> 201</p> <p><i>Jack Dorsey</i> 201</p> <p><i>Bill Gates, Paul Allen, and Steve Ballmer</i> 201</p> <p><i>Reed Hastings</i> 202</p> <p><i>Kylie Jenner and Robyn Fenty</i> 202</p> <p><i>Phil Knight</i> 203</p> <p><i>Jack Ma, Pony Ma, and Robin li</i> 203</p> <p><i>Rupert Murdoch</i> 203</p> <p><i>Elon Musk</i> 204</p> <p><i>Amancio Ortega</i> 204</p> <p><i>Howard Schultz</i> 204</p> <p><i>Oprah Winfrey</i> 205</p> <p><i>Mark Zuckerberg and Sheryl Sandberg</i> 205</p> <p>Buffett’s Tips from Chapter 10 206</p> <p>References 206</p> <p><b>Chapter 11: Being Thrifty like Buffett: Ways to Save Money 208</b></p> <p>Introduction 208</p> <p>Your Library: Free Books, Magazines, Newspapers, Music, Movies, and More 209</p> <p>Free Educational Courses: Khan Academy, Coursera 211</p> <p>Websites for Free Stuff 212</p> <p>Free Activities 213</p> <p>Amazon.com: The World’s Biggest Store 214</p> <p>Comparison Shopper Tools: Your New Best Friend 215</p> <p>Barter: Turning a Cell Phone into a Porsche Convertible 216</p> <p>Eat a Low-Cost Meal, Periodically 217</p> <p>Shop Private Label and Generic Items 219</p> <p>Clothes: Outlet Stores, Vintage Items, and Buying Off-Season 220</p> <p>Buying Gasoline 221</p> <p>Coupons, Double-Couponing, Triple-Couponing, and Groupon 222</p> <p>Rewards Programs 223</p> <p>Negotiate with Cell Phone, Cable, and other Service Providers 224</p> <p>Yard Sales, Flea Markets, and More: Turning Trash into Treasure 225</p> <p>Do-It-Yourself 227</p> <p>Donate Things to Charity 227</p> <p>Avoid Shooting Yourself in the Foot with Bad Habits 228</p> <p>Tying It All Together in a Budget 228</p> <p>Buffett’s Tips from Chapter 11 232</p> <p><b>Appendix: Sample Budget 232</b></p> <p>References 233</p> <p><b>Chapter 12: Buffett’s Views on Cars and Homes 235</b></p> <p>Introduction 235</p> <p>Do You Need a Car? 236</p> <p>New Cars vs. Used Cars 237</p> <p>Buying vs. Leasing a Car 239</p> <p>The Best Time to Buy or Lease a Car 241</p> <p>Home Basics 243</p> <p>Finding A Home 244</p> <p>Bidding for a Home 245</p> <p>Paying for a Home: The Down Payment 246</p> <p>Paying for a Home: The Mortgage 248</p> <p>A “House Hack”: Getting Someone to Pay (Most of) Your Mortgage 250</p> <p>Looking Under the Hood of a Mortgage 250</p> <p>What Determines Home Prices? 254</p> <p>Buffett’s Tips from Chapter 12 254</p> <p>References 255</p> <p><b>Chapter 13: Buffett on Dale Carnegie, Communication Skills, and Emotional Intelligence 257</b></p> <p>Buffett Learns Life-Changing Skills in a Dale Carnegie Course 257</p> <p>CliffsNotes Version on Dale Carnegie and How to Win Friends and Influence People 259</p> <p>Things How to Win Friends and Influence People Will Do for You 260</p> <p>Techniques in Handling People According to How to Win Friends and Influence People 261</p> <p>Six Ways to Make People Like You According to How to Win Friends and Influence People 264</p> <p>How to Win People to Your Way of Thinking, According to</p> <p>How to Win Friends and Influence People 266</p> <p>What Is Emotional Intelligence (EQ)? 269</p> <p>Emotional Intelligence (EQ): Some Details 270</p> <p>Have A Great Posse 274</p> <p>Buffett’s Tips from Chapter 13 277</p> <p>References 277</p> <p><b>Chapter 14: Buffett’s Tips for College 280</b></p> <p>Introduction 280</p> <p>College: The Basics 281</p> <p>Getting into a College 282</p> <p>Graduate School: Optional for Some Jobs, Mandatory for Others 284</p> <p>Paying for College: Scholarships and Grants 286</p> <p>Paying for College: The Three-Year Plan for Super Achievers 287</p> <p>Paying for College: 529 Plans 287</p> <p>Paying for College: Student Loans 288</p> <p>Paying for College: On- and Off-Campus Jobs 290</p> <p>Your Resume: A Snapshot of Your Qualifications for a Job 291</p> <p>Putting Together Your Resume 292</p> <p>The Objective Section 292</p> <p>The Education Section 293</p> <p>The Work Experience Section 294</p> <p>The Skills Section 295</p> <p>The Activities and Interests Section 296</p> <p>Cover Letter 297</p> <p>Buffett’s Tips from Chapter 14 297</p> <p>Appendix 298</p> <p>References 299</p> <p><b>Chapter 15: Buffett’s Tips for Careers 300</b></p> <p>Introduction 300</p> <p>LinkedIn Profile: Your Online Resume 300</p> <p>Finding an Internship or Job 302</p> <p>The Job Interview(s): Preparation 303</p> <p>The Job Interview(s): Acing Your Interview 306</p> <p>The Job Interview(s): Compensation, or Show Me the Money! 309</p> <p>Succeeding on the Job 310</p> <p>Financial Paperwork After Getting a Job 313</p> <p>Forms W-2 and W- 4 313</p> <p>Form 1040: The Annual Income Tax Form and “The Buffett Rule” 314</p> <p>Retirement Plans 316</p> <p>Becoming a 401(k) or IRA Millionaire 318</p> <p>Buffett’s Tips from Chapter 15 319</p> <p>Appendix 319</p> <p>Health Benefits Information 319</p> <p>References 322</p> <p><b>Chapter 16: Buffett’s Tips for Philanthropy 324</b></p> <p>Buffett’s Huge Gift and the Giving Pledge 324</p> <p>Getting Involved in Philanthropic and Charitable Activities 327</p> <p>Measuring Performance 329</p> <p>Market-Based Economies Are Good Unless You Wind Up as Roadkill 331</p> <p>It’s Not All About the Benjamins 333</p> <p>The Loss of Reputation Hurts More Than the Loss of Money 335</p> <p>Inheritance Matters 337</p> <p>Buffett’s Definition of Success 338</p> <p>Buffett’s Tips from Chapter 16 339</p> <p><b>Appendix 339</b></p> <p>Charitable Lunch Auctions for Warren Buffett, Benefiting Glide Foundation 339</p> <p>References 340</p> <p>Glossary of Financial Terms in “Plain English” 343</p> <p>Index 393</p>

<p><b>JOHN M. LONGO</b> is a Professor of Profes- sional Practice in the Finance and Economics Department at the Business School of Rutgers University. He has also been visiting professor of finance at EMBA-Global Asia—the joint Executive MBA program of Columbia Business School, London Business School, and The University of Hong Kong. He has more than 25 years of professional investment experience and is currently serving as Chief Investment Officer of Beacon Trust, a $3+ billion registered investment advisor. A Chartered Financial Analyst (CFA), Professor Longo earned an MBA in Finance and a PhD in Finance from Rutgers, where he also received his BA degree. <p><b>TYLER J. LONGO</b> is a high school student in the Princeton, NJ area. He has completed the Introduction to Business, Finance, and Economics program for high school students at Columbia University and additional coursework in AP Economics, AP Statistics, and Financial Literacy. He has become financially literate in large part due to his work on this book.

<p>Praise for <b>BUFFETT'S</b> TIPS <p>"John Longo and his son, Tyler, have performed a valuable service, taking the wisdom of Warren Buffett (the supply of which is ample) and distilling from it 100 'tips,' with the authors' own explanatory text, to guide the reader from financial ignorance to a degree of financial literacy. Along the way, there are useful lessons for life in general. If you have a friend, child, or parent who needs a pathway to a better understanding of some financial fundamentals, get this book for them—it'll go a long way to bringing them up to speed."</br> <b>—Simon Lorne,</b> Vice Chairman and Chief Legal Officer, Millennium Management LLC; former Partner, Munger, Tolles & Olson <p>"Priceless. 100 investment and life tips from the Oracle—a great read for the beginning investor."</br> <b>—S. Basu Mullick,</b> retired Portfolio Manager and Managing Director, Neuberger Berman; former General Partner, Omega Advisors; noted value investor; former "Marketwatch Fund Manager of the Year" <p>"John Longo has a well-earned reputation for excellence in teaching at the University level. Working with his son Tyler, John now extends his passion for education out of the classroom and across generations with this guidebook to the essential tools for financial proficiency."</br> <b>—Gregory P. Francfort,</b> noted value investor; former Institutional Investor "All-Star Analyst" <p>"John and his son have written an invaluable guide steeped in the wisdom of Warren Buffett. Marrying sound financial advice with general life lessons, <i>Buffett's Tips</i> provides a solid foundation for advancing financial literacy across a broad multi-generational audience."</br> <b>—Joshua Rosenbaum, Joshua Pearl, Joseph Gasparro,</b> co-authors, <i>The Little Book of Investing Like the Pros</i> and <i>Investment Banking: Valuation, LBOs, M&A, and IPOs</i>

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