When it comes to the world of investments - especially in the stock market - Warren Buffet, the Chief Executive Officer of Berkshire Hathaway, is an enigma.
Celebrated as the "Oracle of Omaha" because of his unparalleled success in the stock market, Warren Buffet lives the life of your regular next-door neighbour, hardly eats in classy restaurants and drives a regular, used 4-wheel drive.
How is he able to maintain success for so many years? Here are some of his best advice. Hear him:
"We will never become dependent on the kindness of strangers. We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses."
Buy when everyone else is selling
"We've put a lot of money to work during the chaos of the last two years. It's been an ideal period for investors: A climate of fear is their best friend.... Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."
Don't buy when everyone else is buying
"Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying."
Value, value, value
"In the end, what counts in investing is what you pay for a business -- through the purchase of a small piece of it in the stock market -- and what that business earns in the succeeding decade or two."
Don't get suckered by big growth stories
Buffett further reminded investors that he and Berkshire's Vice Chairman, Charlie Munger, "avoid businesses whose futures we can't evaluate, no matter how exciting their products may be."
Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. "Dramatic growth" doesn't always lead to high profit margins and returns on capital.
Understand what you own
"Investors, who buy and sell based upon media or analyst commentary are not for us.
"We want partners, who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it's one that follows policies with which they concur."
Defense beats offense
"Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the 11 years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue."
All hard work bring a profit, but mere talk leads only to poverty.
A sleeping lobster is carried away by the water current.
Never depend on a single source of income. (At least make your Investments get you second earning)
If you buy things you don't need, you'll soon sell things you need.
Don't save what is left after spending; Spend what is left after saving.
The borrower becomes the lender's slave.
It's no use carrying an umbrella, if your shoes are leaking.
Beware of little expenses; A small leak can sink a large ship.
Never test the depth of the river with both feet.(Have an alternate plan ready)
Don't put all your eggs in one basket.
General Investment Rules
- Rule Number 1 - Never lose money
- Rule Number 2 - Don't forget rule number 1
- You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right - and that's the only thing that makes you right.
- Risk comes from not knowing what you're doing. If you don't know jewelry, know the jeweler.
- If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.
- There seems to be some perverse human characteristic that likes to make easy things difficult (Remember his advice to Bill Gates - keep it simple).
- One's objective should be to get it right, get it quick, get it out, and get it over... your problem won't improve with age.
- A public-opinion poll is no substitute for thought.
- It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
- "I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. "I'm paying $32 billion today for the Coca Cola Company because..." If you can't answer that question, you shouldn't buy it. If you can answer that question, and you do it a few times, you'll make a lot of money.
- You ought to be able to explain why you're taking the job you're taking, why you're making the investment you're making, or whatever it may be. And if it can't stand applying pencil to paper, you'd better think it through some more. And if you can't write an intelligent answer to those questions, don't do it.
- Be fearful when others are greedy, be greedy when others are fearful.