Are You Billionaire Material? Buffet-style Investing Quiz

Submitted by Craig Strzelecki on 18 February, 2006 - 23:53

Buffet is arguably the best investor in the world. His investment style ("Buffet Style Investing) is revered and many books and other media worship his techniques and way of thinking. We have a six question quiz to check if you are billionaire material, and have a similar way of thinking in your style of investing.

But remember - you are on a share trading website - so basically the quiz answers are aimed for an investors mind. However, there are answers in there that a trader would typically answer in those situations. Investing is itself a skill, just like trading and the answers may surprise most people.

Q.1 How do you pick a winning stock?

A. Score a tip from a frequent trader
B. Make the trend your friend
C. Go for a red-hot stock in white-hot sector
D. Find a great business at a bargain price

Q.2 Kelvin next door say's he's onto a hot stock. What should you do?

A. He has an Italian sports car! Buy now!
B. How do you think he got that Italian sports car? Steer clear!
C. Look at the financials and business model
D. Check the charts for a breakout

Q.3 Your broker calls with a new IPO. They make extensible enterprise integration systems. Are you in?

A. Don't know what it is but it sounds exciting. I'll take 1000.
B. She's a smart woman. If she likes it, I'll buy it.
C. If the sentiment is positive, buy for the stag profit.
D. Extendable what? Forget it.

Q.4 It's a great business, the growth is already priced in. What do you do?

A. Buy now. Infive years they'll be worth twice as much.
B. Sit tight until they're going cheap
C. Check the Doji Star
D. Look for better value elsewhere, even if it means investing in a weaker business

Q.5 It's a dog of a stock, but it's on a roll. If you get in and out quick, you could make some dollars. Is it worth a shot?

A. Sure, that's how traders make their money
B. No way! Save your money for a quality business
C. Haven't you heard? Dogs make the best investments
D. If there's no dark cloud cover, put some play money on it

Q.6 The market's in freefall. The punters are panicking! What should you do?

A. Nothing. A good business is still a good business
B. Take profits while you still can
C. Start hunting for bargains
D. Go underweight shares, overweight fixed interest

ANSWERS =================================================

Q.1 How do you pick a winning stock?
D. Find a great business at a bargain price

"Our method is really simple. We just try to buy businesses with good to superb underlying economics, run by honest and able people, and buy then at senisble prices"

Q.2 Kelvin next door say's he's onto a hot stock. What should you do?
C. Look at the financials and business model

"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."'

Q.3 Your broker calls with a new IPO. They make extensible enterprise integration systems. Are you in?
D. Extendable what? Forget it.

"Never invest in a business you cannot understand."

Q.4 It's a great business, the growth is already priced in. What do you do?
B. Sit tight until they're going cheap

"We insist on a margin of safety in our purchase price. If we calculate the value of a common stock to be only slightly higher that its price, we're not interested in buying."

Q.5 It's a dog of a stock, but it's on a roll. If you get in and out quick, you could make some dollars. Is it worth a shot?
B. No way! Save your money for a quality business

"If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.

Q.6 The market's in freefall. The punters are panicking! What should you do?
C. Start hunting for bargains

"Be careful when others are greedy and greedy only when others are fearful."

If you get 6/6 you are a "cool investor"

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