Many people talk about legendary investor as though he were some revered sort of human being. Truthfully the most legendary investors are the ones who won the most or, as sadly has recently been the case, lost the biggest. Or some combination thereof. For a legendary investment name like Warren Buffett, here is a guy who has been constantly trending ahead of the game and has offered to the investing world a number of pearls of wisdom which are still quoted often. “Be fearful when others are greedy and greedy when others are fearful,” is perhaps his greatest contribution to the investing world, but who is Warren Buffett? How did Mr. Buffett come into all of his money? How did he come into prominence? What separates his investing style from others?
Who is Warren Buffett? The Oracle of Omaha. For a mini-Buffett bio, we turn to About.com. Buffett’s introduction to investing was inborn; his father was a stockbroker and Buffett apparently always had an aptitude for money and business. Buffett’s early investment teachings found Buffett seeking out why some companies were superior to others; something of an original idea in Buffett’s time. Buffett finally stepped out on his own and he did so on his own terms; shunning New York City and all the trappings of Wall Street; instead handling his operations out of his hometown of Omaha Nebraska; thus earning the nickname the Oracle of Omaha.
How Did Warren Buffett Get His Riches: Buffett began his career as a stockbroker in New York City. However he did quickly do an about-face as soon as he was able to step out on his own. His somewhat hostile takeover investment in the textile company Berkshire Hathaway in 1965 laid the groundwork for his future plans. Buffett partnered with other businesses and ended up turning Berkshire Hathaway from a flailing textiles company into a profitable and powerful insurance and banking sectors. Buffett would go on to make billions of dollars by smart, frugal investing and long-term horizons; something that all the speculative, knee-jerk reaction investors of today’s world would be wise to familiarize themselves with.
Top 25 Warren Buffett Rules:
Here are the rules which the legendary investor Warren Buffett follow:
1. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1
2. In a bull market, one must avoid the error of the preening duck
that quacks boastfully after a torrential rainstorm, thinking that its
paddling skills have caused it to rise in the world. A right-thinking
duck would instead compare its position after the downpour to that of
the other ducks on the pond.
3. If I was running $1 million today, or $10 million for that matter,
I’d be fully invested. Anyone who says that size does not hurt
investment performance is selling. The highest rates of return I’ve
ever achieved were in the 1950s. I killed the Dow. You ought to see
the numbers. But I was investing peanuts then. It’s a huge structural
advantage not to have a lot of money. I think I could make you 50% a
year on $1 million. No, I know I could. I guarantee that.
4. The fact that people will be full of greed, fear or folly is
predictable. The sequence is not predictable.
5. It’s far better to buy a wonderful company at a fair price than a
fair company at a wonderful price.
6. When a management with a reputation for brilliance tackles a
business with a reputation for bad economics, it is usually the
reputation of the business that remains intact.
7. You only find out who is swimming naked when the tide goes out.
8. Risk comes from not knowing what you’re doing.
9. Be fearful when others are greedy. Be greedy when others are
10. Most people get interested in stocks when everyone else is. The
time to get interested is when no one else is. You can’t buy what is
popular and do well.
11. Price is what you pay. Value is what you get.
12. Whether we’re talking about socks or stocks, I like buying quality
merchandise when it is marked down.
13. I don’t look to jump over 7-foot bars: I look around for 1-foot
bars that I can step over.
14. Look at market fluctuations as your friend rather than your enemy;
profit from folly rather than participate in it.
15. If a business does well, the stock eventually follows.
16. I try to buy stock in businesses that are so wonderful that an
idiot can run them. Because sooner or later, one will.
17. The line separating investment and speculation, which is never
bright and clear, becomes blurred still further when most market
participants have recently enjoyed triumphs. Nothing sedates
rationality like large doses of effortless money. After a heady
experience of that kind, normally sensible people drift into behavior
akin to that of Cinderella at the ball. They know that overstaying the
festivities – that is, continuing to speculate in companies that have
gigantic valuations relative to the cash they are likely to generate
in the future – will eventually bring on pumpkins and mice. But they
nevertheless hate to miss a single minute of what is one helluva
party. Therefore, the giddy participants all plan to leave just
seconds before midnight. There’s a problem, though: They are dancing
in a room in which the clocks have no hands.
18. Investors making purchases in an overheated market need to
recognize that it may often take an extended period for the value of
even an outstanding company to catch up with the price they paid.
19. Never count on making a good sale. Have the purchase price be so
attractive that even a mediocre sale gives good results.
20. Should you find yourself in a chronically leaking boat, energy
devoted to changing vessels is likely to be more productive than
energy devoted to patching leaks.
21. I like to go for cinches. I like to shoot fish in a barrel. But I
like to do it after the water has run out.
22. In the business world, the rear view mirror is always clearer than
23. We don’t get paid for activity, just for being right. As to how
long we’ll wait, we’ll wait indefinitely.
24. The investor of today does not profit from yesterday’s growth.
25. Someone’s sitting in the shade today because someone planted a
tree a long time ago