Warren Buffett is a name that needs no introduction in the business world. The 93-year-old legendary American business magnate, investor, and philanthropist serves as the Co-founder, Chairman, and CEO of Berkshire Hathaway Inc., a multinational conglomerate holding company based in Omaha, Nebraska, United States.
He is regarded as one of the greatest investors of the present-day world and with a net worth of 134 billion USD, he is the seventh richest person in the world, presently.
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Having a Long-term Vision
One of the important investment lessons from Warren Buffett that we can get is to focus more on long-term vision in making our investment decisions. One of his famous quotes is “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.” Rather than wrecking brain to predict short-term market movements or desperately acquire the current hot stocks, Buffett prefers buying quality stocks at a fair price with a long-term perspective.
Instead of getting worried by temporary market fluctuations, a savvy investor, like Buffett, should focus more on the fundamentals of the company on which to invest in. He prefers to invest in companies with a strong competitive advantage, consistent earnings, and low debt. In fact, this thought of his could not only be applied to stocks but to almost all investment decisions of a person to enhance the chance of reaping long-term enduring profits.
Seizing Opportunities
From Buffett, many investors and potential investors can learn to seize the right opportunity at the right time. For example, in 2008, when the business world was suffering a global meltdown, Buffett moved swiftly in that climate of investment apprehension and made large investments in blue-chip companies like GE, Goldman Sachs, Bank of America, Mars; an exercise which fetched him much more than handsome profits.
Buffett articulated in his 2018 shareholder letter that “Seizing opportunities does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”
By thinking out of the box or not adhering to the herd mentality, savvy investors, like Buffett, can seize the right opportunity at the right time.
Understanding is Must
Many investors start investing in stocks without having even the basic understanding of those stocks’ market behaviour. These investors should imbibe from Buffett the important lesson to invest in those areas where they have an understanding of. One of his famous quotes reads: “Never invest in a business you cannot understand.”
For long period of time Buffett himself did not understand how to value technology stocks and thus he stayed away from those stocks for several years. Only in 2016 Berkshire Hathaway bought a stake in Apple after getting a thorough understanding of its business.
In fact, one of the very few mistakes in Warren Buffett’s long life have been investing in Dexter Shoes, a company he knew not much about. The investment proved to be a failure.
The Need for Patience
From Warren Buffett, investors can learn the invaluable value of patience in the investment process. One of the Buffett’s much talked about investment decisions speaks volumes about his patience.
In 1994, Berkshire Hathway bought shares in Coca Cola, and in 1995 Berkshire Hathway bought stake in American Express, both for $1.3 billion each. On 31st December 2022, Berkshire Hathaway’s total stake in American Express was valued at roughly $22 billion and its total stake in Coca-Cola was valued at $25 billion.
Diversification is the Key
Diversification is another of the smart investment lessons that investors and potential investors can learn from Warren Buffett. Rather than opting to invest in a single industry or sector, Buffett has built a portfolio of investments covering a wide spectrum of industries. Diversification in investment can safeguard against sudden downturns in any given sector.
Beyond Finances
However, Buffett’s lessons or perspectives on life have wide ranging applications that goes much beyond finances. One of Buffett’s great quotes is not only applicable to investors but to people from all walks of life. It simply reads: “Chains of habit are too light to be felt until they are too heavy to be broken.” This is a profound thought indeed.
If we get trapped by bad habits, its negative affect may not be that perceptible in the near future, but in the long-term its strong chains may severely and adversely impact our successes and directly influence our failures. But by then it becomes too difficult to get free of those chain of bad habits.
Another of Warren Buffett’s saying has the potential to provide important life lessons. He said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Companies or individuals who gamble with their well-established reputation for quick profits are liable to see it diminish rapidly, potentially hindering their future success prospects.
Inspiring Philanthropy
Besides being one of the greatest investors of our time, Warren Buffett is also one of the all-time greatest philanthropists that the world has seen. He has donated billions of dollars in charity and became the biggest charity donor of 2023 with $541.5 million donation made during 2023.
Many investors, entrepreneurs and even common persons can get inspired by him and engage in philanthropy according to their means to collectively contribute towards a better, more equitable world.
