What Does Warren Buffett Think About Investing?

Warren Buffett’s company Berkshire Hathaway recently released their annual report. I highly recommend reading this annual report because it’ll give you insight into the greatest mind in value investing today. I enjoyed reading the report, and would like to share some of the highlights here.

Here are in Warren Buffett’s own words, his thoughts on investing:

  • You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”
  • Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.
  • If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.
  • With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

  • Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”)
  • My two purchases [farm and retail property near NYU] were made in 1986 and 1993. What the economy, interest rates, or the stock market might do in the years immediately following – 1987 and 1994 – was of no importance to me in making those investments. I can’t remember what the headlines or pundits were saying at the time. Whatever the chatter, corn would keep growing in Nebraska and students would flock to NYU.
  • When Charlie and I buy stocks – which we think of as small portions of businesses – our analysis is very
    similar to that which we use in buying entire businesses.

Like I said, the Berkshire Hathaway annual report contains some amazing nuggets of wisdom. Remember in order to be a successful investor keep investing simple, focus on the long-term, and ignore the media noise.

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Photo Credit: http://www.biography.com/people/warren-buffett-9230729

5 Responses to “What Does Warren Buffett Think About Investing?”

  1. Hari says:

    Thanks for sharing these investing lessons. Great post

    Buffet, is a great teacher, He is generous in sharing his ideas and even his mistakes. He lists some of the top mistakes he has made in one of his annual letters. I have listed them in one of my posts link – http://bitsbusiness.wordpress.com/2014/03/13/lessons-from-masters-mistakes/

    thanks
    Hari

  2. Alex says:

    What a great that was! I was devouring it today and it inspired me so much. His candour and willingness to share his wisdom is commendable and I have learned so many things I am going to incorporate in my investments.

    Few take aways for me from the 2013 annual reports were:
    -you don’t need to be an expert to invest
    -just do simple determination if your invest will yield a return/profit
    -don’t believe those who promise you a quick profit
    -stay within the “circle of your competency” and only invest in something simple and even dummy can
    -stocks are great investment if you can’t buy the business
    -invest for the long hall
    -keep costs down and in mind when investing
    -don’t buy stocks or businesses just on the price but for the underlying intrinsic value
    -the best investment he has ever made was buying and reading The Intellinent Investor by Bejamin Garaham, the father value investing and his mentor and teacher. So go get that book if you haven’t already!

  3. Very interesting. I find it interesting that many of the great minds have an attitude that you need not be an expert in order to be successful. I think most people assume you need some special knowledge and abilities, but few people at the top hold that these things are necessary. Thanks for the post!

  4. I believe Warren Buffett has been quoted as saying investing should be as boring as watching paint dry – simple, automatic and non-emotional

  5. kanwal says:

    Thanks for everyone’s comments! There is so much wisdom to gain from someone like Warren Buffett.

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