Practical Advice on Investing from Warren Buffett
Warren Buffett is one of the best investors of our time. The man, commonly referred to as the Oracle of Omaha, has been a successful investor for more than 60 years. He has successfully grown his company, Berkshire Hathaway – to be one of America’s best-known success story. The company is worth more than $490 billion and Buffett himself is worth more $80 billion. In this article, we will look at the top lessons we can all learn from Warren Buffett.
Have a Mentor
Warren Buffett started investing after reading The intelligent investor book by Benjamin Graham. In the book, Benjamin explained all the most important details about value investing. After reading the book, he looked for Graham and the two became friends. As a young investor, he looked up to Graham, who was a major role model to him. The lesson for investors is that they should always look for mentors and role models. Fortunately, it is easy to do this through the use of social media or finding the contact details of other successful investors.
Have a Good Investment Partner
Part of the reason why Buffett has had enormous success is because of his investment partner, Charlie Munger. Munger has been Buffett’s partner for decades. As a result, the two have become close friends, who make investment decisions together. In past interviews, Buffett has credited Munger for the success of his fund. As you start your investment career, we recommend that you try and find a partner who will help you make decisions.
Berkshire Hathaway has invested in more than 50 companies. It has a 100% ownership in some companies like Business Wire and Geico. Other companies in its portfolio include Bank of America, Apple, and General Motors. The benefit of being diversified is that losses in one company are pared by the gains in other companies. This model has been replicated by other successful money managers like Ray Dalio and Ken Griffin.
Have a Long-Term Strategy
Warren Buffett has been vocal about his value investing strategy. He has written widely about the criteria that he uses to select companies to invest in. This does not mean that you too should be a value investor. The lesson here is that you should find your unique investment strategy and follow it to the end. Indeed, other investors who look up to Buffett have succeeded using other approaches to investing. For example, James Simmons, who runs a fund known as Renaissance Technologies has been successful by focusing on quantitative approaches to investing.
Find Your Happiness
Warren Buffett is one of the richest people in the world. He can afford virtually anything he ever wants. However, Buffett has never been fond of material wealth. He still lives in a small house that he acquired more than 50 years ago. He still works in an obscure office building in Omaha. He drives a relatively cheap car. Yet, he is a happy person. The lesson here is that you should not be attached to material wealth. Instead, find what makes you happy and don’t lose focus.
Warren Buffett is 88 years old. His partner, Charlie Munger is 95 years old. Yet, the two still work hard every day in the same office. Every year, the two hold their annual shareholder meeting. The lesson here is that when you find something you love you should never think about retirement. In fact, studies have shown that people who retire early tend to develop complications.
As you succeed as an investor, you should not forget to give back to the society. Warren Buffett has pledged to give all of his wealth to charity. He has donated more than $34 billion since 2006. This makes him one of the biggest philanthropists in the world. In fact, other rich people like Buffett are also big donors. This could be the reason why Buffett has had a lot of success in his career.
Own Your Mistakes
While Buffett has been a successful investor, he has also made many mistakes. For example, a few years ago, he invested in IBM. This was his first foray into the technology industry, which he doesn’t know well. A few years later, he exited his investment at a loss. Recently, his investment in Kraft Foods has turned out sour. In his letters and interviews, Buffett has always talked about his investment mistakes and the lessons he has learned.
Warren Buffett has succeeded as an investor by following the value investment approach. He has been an inspiration to many investors and many recipients of his donations. If your dream is to be a successful investor, you should learn from these investment lessons from Buffett.