Warren Buffett is an American business tycoon, investor and philanthropist. He is currently chairman of Berkshire Hathaway. He is one of the most successful investors and has a net worth of over $95 billion as of October 2022 making him world’s sixth-wealthiest person. He dedicated his whole life to investing. There are a lot of investing lessons we can learn from him..
1. Start early and understand your goal:
If you didn’t start your own business at the age of seven and decide to be a millionaire at twelve, it doesn’t condemn you to defeat. But an early start gives you a competitive edge.
From the earliest buffet was interested in money and numbers. He was given his conclusions from the facts.Be guided by your own talents and passion, but never forget that the facts are also important in business and investment. Even in the stock market, you get success if you follow the basics principle of reality.
2. Work Hard and Save your money:
Warren Buffett never counted windfalls or lucky breaks( although he got more than a few) to build up his wealth. His success is based on passion, energy, initiative and continuous hard work. His childhood newspaper delivery route meant getting up before dawn, folding the newspaper to be delivered, and riding his bike for miles in all kinds of weather to fling them onto front porches.
Early on, he understood the miracle of compounded capital and considered each dollar in his pocket as a potential $10 bill if he invested it instead of spending. He still studies long hours each day at work, researching and searching out potential business opportunities. He has lived in his old home for decades.
For years, Buffet has spent very little money on charity. He saw his role as using money to make more money, which he would give in a right time, but not before he made a lot of money. When he made huge money he decided to give away his vast wealth to Charity. He did this in a way that allowed him to continue his investment properly.
3. You can never know too much:
Buffett’s research is Deep and endless. When the young buffet began handicapping horses, he read a lot of books on racing and sent them away for old racing form so he could sharpen his skills on past races. Working in Ben Graham’s office, he read every document in his files and studied basics of statistics from obscured ledgers and reports. He worked tirelessly to seek out facts about companies that got his attention. In every deal, he tried to get precise information about companies and their industries and he usually succeeded.
In any deal, the one who knows the most will eventually be on the top.
4. Keep a margin of safety:
Be sure there’s something to protect you if anything goes against plan. Buffet first learned how to fix your thing at the race track, when he and his friend gathered winning tickets that careless bettors had thrown away. In Ben Graham’s office, he learned to adopt that technique to find “Cigar Butts” of failing companies whose stock was trading for less of their actual worth. He went on to arbitrage, trading to take advantage of inconsistencies in prices in the different markets. Then he learned how to use other people’s money for his own benefit, buying up companies such as insurers that gave surplus cash he could invest until it was needed to pay claims.
In Buffett’s rescue of the Salomon brothers, he was breaking his strongest rule by investing in a business he didn’t have much awareness about, Investment
Banking. But he had a hefty margin of safety in the 9 percent interest Solomon would pay until his convertible preferred stock could become profitable in the market. He had another margin of safety in his own growing reputation as a winner with the deal to save Geico.
5. Look for great Business and Be Patient:
Buffet told Berkshire Hathaway shareholders in one of his annual reports, Munger taught him decades ago that it’s much better, “to get a great business at a fair price then get a fair business at a great price.” He prides himself on buying into companies with a franchise so strong that, as in the case of Coca-Cola, it can survive even being run by a ham sandwich. And when he takes a stake in such a company he often considers it as the best investment of his life.
He is endlessly patient through the market ups and downs. He had more money by doing nothing than why most of his active moves. When he can’t find a great deal he likes, he will calmly leave the market that day. He earned huge wealth due to his patience in the market.
6. Never Run With Herd:
In the late 1990’s when high-tech stocks were going high in the markets and seemingly everyone was getting profit from them, Buffet took severe criticism for refusing to climb aboard the bandwagon. He just refused it. He might be wrong, he accepted, but he knew nothing about technology and he had a principle never to invest in anything he didn’t understand. Berkshire’s price stagnated,then it dropped almost by half, and some investors sold out all Berkshire shares. Some media agencies taunted Buffet. But when Tech-Bubble burst, he was praised and proved right yet again.
Warren Buffett is the modern day epitome of wealth creation. “Be greedy when others are fearful and fearful when others are greedy”, he advised and time and again he profited from his own wisdom.
7. own up to your mistakes :
Always the first to point out his errors, Buffet has won a reputation for open humanity and cheerful self. Everybody makes mistakes and you will too. What is important is to recognise them and what is even more meaningful is what you do to correct what’s gone and avoid repeating it. Even a big blunder becomes negligible if you produce great performance in the future. And showing humility, you boost confidence in your team, even again loyalty and success as well.
8. Be willing to rethink basics Strategies:
Following Ben Graham teaching, Buffett made a fortune picking up his “Cigar Butts”. But after he met with Charlie Munger, Buffet saw the wisdom in Munger teaching that it was better to start with a good company in the first place and be along for the ride as the company becomes great and gives you huge profit. From then on, Buffet would still collect the discarded cigar, he was on the lookout for businesses with market position, future scope of business, resources and talented managers to rise to the top and stay there.
His great holding companies, Berkshire,Hathaway, Coca-Cola, Geico, The Washington Post company, BNSF Railroad and American Express, these businesses can and do run into trouble from time to time. But key factors about them are that their basic foundation is strong to solve their problems and regain their momentum.
Buffett’s flexibility is one of his basic strengths. He is always learning. He is also willing to break his own rules for investing including the basic precept of staying within his own circle of influence. But knowing what is reasonable – and when is the right time – is even more difficult. That’s what makes Warren Buffet a leader and why he is probably right that most people shouldn’t try. Think very deeply before you ignore his advice to stick to index funds.
Remember we can’t all be Warren Buffett, but we’d all be better if we follow his principle in investing and in life as well. And remember, too, he was doing that long before he became a billionaire, so it’s an example for all of us to follow.
