Warren Buffett is the greatest investor in history and one of richest men in the world. Here are 15 of the biggest lessons I learnt from him,
15. Compound Interest & Long Term Thinking: “My life has been a product of compound interest,” Understand the power of compound interest. Steady, long-term investments can yield accelerating wealth over time. This applies to relationships, learning, and investing.
14. Invest in Yourself: “Ultimately, there’s one investment that supersedes all others: Invest in yourself,” Warren Buffett credits a $100 Carnegie public-speaking course as one of the best investments he made for transforming his life.
13. Think of investing as buying a business. Don’t think of investing as buying a stock to sell. “If you’re going to try to buy and sell them based on news or something your neighbor tells you, you’re not going to do well.” Look at them as buying a business’
12. Write down your why. “Everybody when they buy a stock should be able to take a yellow pad” and write down exactly why they plan to invest in that particular company, Buffett said. Writing is great because it forces you to think clearly and you can learn from past decisions.
11. Invest in What You Know: Your “circle of competence.” Buffett says that over time he has expanded his circle of competence a bit, but he has also found areas where he’s incompetent and shouldn’t be investing.
10. ‘Be Fearful When Others Are Greedy and Greedy When Others Are Fearful’ It’s important to think for yourself, and understand that the market can overreact. There can be opportunities in doing the opposite of what most people do.
9. Importance of Good Management: A company’s leadership quality is crucial. “How well they run the business – what they’ve accomplished and what their competitors have accomplished, and how they have allocated capital over time.” and also see how they treat themselves versus how they treat the shareholders.
8. What moat does the business have? Just like a medieval castle, the moat serves to protect those inside the fortress from competitors. Buffett believes Apple is such a great investment because of the way it has created such loyalty.
7. Price vs Value: “Price is what you pay, value is what you get.” Distinguish between a company’s price and its value. Calculate it’s value then check the market price to find great companies priced less than their intrinsic value.
6. Importance of Reputation: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Maintain integrity in all your dealings.
5. Avoid Debt: Buffett is known for his conservative approach to debt. Avoid unnecessary debt whenever possible. “If you buy things you do not need, soon you will have to sell things you need.”
4. Importance of Reading: He spends much of his day reading, Buffett said, “Read 500 pages every week. That’s how knowledge builds up, like compound interest.” All of us can but most of us won’t put in the effort. “Go to bed smarter than when you woke up.”
3. Value of Less: ” difference between successful people and really successful people is they say no to almost everything.” Focus on making fewer decisions but make better ones. Rather than trading every day, he invests in a small number of the best companies he finds.
2. “Diversification Is A Loser’s Game ” He believes diversification is protection against ignorance. Most of his wealth has come from investing in small number of companies that he really deeply understands.
1. Humour: Warren likes to make jokes and doesn’t take life too seriously. He has a sense of humour which is essential for dealing with life’s ups and downs. I recommend watching his long form shareholder meetings on Youtube or reading his letters to shareholders for more.
