Billionaire Warren Buffett is widely considered the most successful investor of the 20th century and he is consistently ranked among the world’s wealthiest people. Buffett is the chairman and CEO of Berkshire Hathaway, an American multinational conglomerate holding company oversees and manages a number of subsidiary companies.
The billionaire uses two personal real estate investments to demonstrate some of his key principles: focus on what an investment will produce, not its price; stick to what you know; and don’t try to predict what the economy or stock market will do.
Here are some nuggets of wisdom from Buffett on investing:
It’s very important to have the right framework. If you have the right philosophy, you will find opportunities.
You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well.
Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick ‘no.
The first rule of investing is not to lose money. The second rule is not to forget the first rule.
You should invest in businesses so good that even a fool can run them, because someday a fool will.
Diversification is protection against ignorance. It makes little sense if you know what you are doing.
Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (This would be your Satrix in South Africa).
It’s wiser to invest in a boring index fund than it is to invest with people who try to beat the market.
If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.
Try to be fearful when others are greedy and greedy only when others are fearful.
Price is what you pay; value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.
Ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.
Beware the investment activity that produces applause; the great moves are usually greeted by yawns.
You have to have the right temperament, and you have to be able to ignore what other people are saying and simply look at the facts.
The most important thing in evaluating a company is to be able to define which ones you can come to an intelligent decision on and which ones are beyond your capacity to evaluate.