WISDOM OF Warren buffet

Warren Buffett, Chairman of Berkshire Hathaway, is arguably the world’s greatest investor and the third richest man with a net worth exceeding $52 billion (Rs 213,200 crore). Also known as The Sage of Omaha, he is also full of wisdom and wit. Here are some of his gems of advice for investors who look at the stock market to make a fortune, culled from various publications, his speeches and writings:

  1. Never invest in a business you cannot understand.
  2. Always invest for the long term.
  3. Remember that the stock market is manic-depressive.
  4. Buy a business, don’t rent stocks.
  5. Price is what you pay. Value is what you get.
  6. Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.
  7. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
  8. Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.
  9. Buy companies with strong histories of profitability and with a dominant business franchise.
  10. It is optimism that is the enemy of the rational buyer.
  11. As far as you are concerned, the stock market does not exist. Ignore it.
  12. The ability to say ‘no’ is a tremendous advantage for an investor.
  13. If you’re doing something you love, you’re more likely to put your all into it, and that generally equates to making money.
  14. My idea of a group decision is to look in the mirror.
  15. 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.
  16. The smarter the journalists are, the better off society is.
  17. Success in investing doesn’t correlate with IQ once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.
  18. Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.
  19. 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 – that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.
  20. There seems to be some perverse human characteristic that likes to make easy things difficult.
  21. In the short run, the market is a voting machine but in the long run it is a weighing machine.
  22. It’s only when the tide goes out that you learn who’s been swimming naked.
  23. Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without the first, you really want them to be dumb and lazy.
  24. There are three kinds of people in the world: those who can count, and those who can’t.
  25. It takes 20 years to build a reputation and five minutes to lose it.
  26. The first rule is not to lose. The second rule is not to forget the first rule.
  27. Wide diversification is only required when investors do not understand what they are doing.
  28. Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
  29. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
  30. Our favourite holding period is forever.
  31. If past history was all there was to the game, the richest people would be librarians.
  32. Why not invest your assets in the companies you really like? As Mae West said, ‘Too much of a good thing can be wonderful.”
  33. Your premium brand had better be delivering something special, or it’s not going to get the business.
  34. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.
  35. We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own assets.
  36. Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar, we much prefer to purchase $2 of earnings that is not reportable by us under standard accounting principles than to purchase $1 of earnings that is reportable.
  37. Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.
  38. The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.
  39. Risk can be greatly reduced by concentrating on only a few holdings.
  40. Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
  41. Lethargy, bordering on sloth should remain the cornerstone of an investment style.
  42. An investor should act as though he had a lifetime decision card with just twenty punches on it.
  43. An investor needs to do very few things right as long as he or she avoids big mistakes.
  44. Turnarounds’ seldom turn.
  45. The advice ‘you never go broke taking a profit’ is foolish.
  46. It is more important to say ‘no’ to an opportunity, than to say ‘yes.
  47. It is not necessary to do extraordinary things to get extraordinary results.

Here is a very good video of Warren Buffet given at University of Florida, worthy of watching here.

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