Frequently referred to as the “Oracle of Omaha,” Warren Buffett is one of the most successful investors in history. He runs over 60 well-known companies, such as Dairy Queen and Duracell, and is listed as the fifth person on the Forbes Billionaires list in 2022. While these are only a few of his accomplishments, we can look back and learn l from the lessons learnt in his past.
Buffet was business-savvy from an early age, having developed an interest in investing at the age of eleven. He bought six shares of Cities Service, an oil service company, at $38 per share. But it didn’t stop there, at the age of 17, he set up a pinball machine business in his hometown. The older he got, his interest in business grew with him, and today, is recognised as the world’s most famous and wealthy value investor. He is funny, sharp, and incredibly important in the industry.
Here are the 5 Warren Buffett lessons to consider and inspire your long-term investment goals:
1. “Rule No.1 is never lose money. Rule No.2 is never forget Rule No.1.”
Warren Buffet’s golden rule; this quote is the cornerstone of his personal investment philosophy. Any investor who decides to place money into the market should control and use their money wisely; capital is and must be the main priority. However, his most important rule of investing is not one he follows religiously, and he’s willing to admit that he’s made a few bad investments over the years. No investor will be right 100% of the time.
2. “Never invest in a business you can’t understand.”
One reason why investors may lose money is when they invest in businesses they don’t understand. People tend to invest based on what their friends and family tell them, or by paying attention to the returns of trendy investments promoted through social media and influencers. Before buying any asset or investing in any business, you must be aware of how the asset or business works.
3. “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
This Warren Buffett quote focuses on the concept of long-term investments. Essentially Buffet explains why you cannot expect your investment to flourish and improve at once. Everything needs time to grow and settle. Just as with the trees, most smart investments take time to grow. So, it is important to start early and be patient.
4. “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
It is important to look for a long-term advantage in investments. Remember the first quote and the first golden rule when you are investing. A wonderful company will value wonderfully and it will continue to be a wonderful investment. Some people mistakenly think that the only criteria for buying a stock is that it should be undervalued. However many companies with poor fundamentals are undervalued, a low valuation alone is not enough to make it a good buy. Instead, the first thing you should consider is whether the company has good fundamentals.
5. “Price is what you pay, value is what you get.”
This might be considered one of the most important quotes of Warren Buffett. Price and value are not the same. They are not equal. In the early days of his investment career, Warren Buffett focused on buying beaten-down companies trading at a significant discount to their liquidation values. He named this strategy “cigar butt investing.” Investors who follow the value investment philosophy are looking for deeply discounted stock prices – a great company that is on sale for a low price is the goal of every value investor. If you want to succeed at value investing, you should research businesses and consider those that are undervalued.
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