500 crores without wanting to know some details like how much profit is this company generating, what are the competitive advantages, what are the growth prospects, the risks, the capital expenditure required, etc.īuffett’s lesson here is that instead of getting too caught up in the recent movement of the stock price, you should spend more time analyzing the business behind the stock price. Lesson 3: Have An Owner’s Mindsetįrom Buffett’s perspective, buying a stock is nothing short of buying a business and one should follow the same kind of rigorous analysis and due diligence as one would do when buying a business.įor example, say someone offers to sell you his company for Rs. “A low-cost index fund is the most sensible equity investment for the great majority of investors,” Warren Buffett. In other words, Buffett wants retail investors to follow a system over everything else.Īnd it is this system and a clear investing framework finding great business at good reasonable prices that have powered Berkshire Hathaway for the last five decades to become one of the biggest and most profitable corporations in the world. Lesson 2: System Overpowers The Smartįor someone who earned billions using his stock-picking skills, Buffett’s advice for retail investors to use a low-cost index fund may look surprising but has clear reasoning behind it.Īfter all, investing via index funds gives you the advantage of a system, it allows for a disciplined investing cycle via SIPs and keeps emotions away from corrupting that framework. “Never invest in a business you cannot understand,” Warren Buffett. The point Buffett makes here is that if you know what you are doing then there are enough opportunities everywhere. And this performance chart of Berkshire Hathaway versus Nasdaq really proves it with Berkshire Hathaway staying ahead of the Nasdaq for most of these last two decades. In fact, it was only in 2016 that Berkshire Hathaway bought a stake in Apple after really understanding the business.īut keeping away from technology was not a problem for Buffett at all. Hence he stayed away from these stocks for many years.
#WARREN BUFFET HOW TO#
Buffett has time and again advised investors to not chase everything that shines and to only focus on the opportunities that they understand.įor instance, Buffett himself did not understand how to value technology stocks for a prolonged period of time. Many first-time investors have started trading in stocks and cryptocurrency without really understanding how these asset classes work. Lesson 1: Risk Comes From Not Knowing What You Are Doing So, in this blog, we will put together the available information into 9 valuable investing lessons which can help us in becoming better investors. In fact, Buffett himself has eloquently penned down his thinking framework in his annual letters to Berkshire Hathaway’s shareholders. Over the years, a lot has been written about Buffett’s investing style by others. In other words, if you had invested 10,000 US dollars in his investment firm Berkshire Hathaway in 1965 that 10,000 US dollars would today be worth over 280 million US dollars. It's what you do right now, today, that determines how your mind and body will operate ten, twenty, and thirty years from now.Buffett’s investment track record is outstanding with compounded annual returns of a little over 20% over the last 55 years.
But if you don't take care of that mind and that body, they'll be a wreck forty years later, just life the car would be. Now, it's very easy to let them ride for many years. That's exactly the position you are in concerning your mind and body. I would baby that car, because it would have to last a lifetime. If there was the least little dent or scratch, I'd have it fixed right away because I wouldn't want it rusting.
#WARREN BUFFET MANUAL#
I would read the manual about five times. But, can you imagine, knowing it had to last a lifetime, what I would do with it? If that had happened, I would have picked out that car. This is the last car you're ever going to ge tin your life. Having heard all the genie stories, I would say, 'What's the catch?' And the genie would answer, 'There's only one catch. It'll be here tomorrow morning with a big bow tied on it. And that genie said, 'Warren, I'm going to give you the car of your choice. Let's say that when I turned sixteen, a genie had appeared to me.
I thought about girls, too, but I had more luck with cars. “When I was sixteen, I had just two things on my mind - girls and cars.
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