Investing

Warren Buffett investment rules

1. The right people in your environment

Warren Buffett often emphasizes the role played by his idols. It is thanks to them that he achieved success. In an interview for the magazine “University of Nebraska Business Magazine”, he mentions that when it comes to idols, he was quite lucky from the beginning:

I was lucky for an idol, starting with my dad. They have never let me down. If you have the wrong one, then you have a serious problem. Remember that you are like the people you admire. If you do not choose these people carefully, you will get into trouble very quickly.

Warren Buffet for the University of Nebraska Business Magazine (2011)
Everyone knows how much influence Buffett’s investment had on Benjamin Graham, with whom he cooperated at the beginning of his career. It was from him that he learned to invest in value. However, it was not the only Buffett idol. Equally important influence on the way of thinking about investments was also made by his partner Charles Munger.

People who met us with each other thought that we would hate each other quickly. We both have very strong personalities. Many times we disagreed with each other, but we never argued. If you compare your views with others, then you will gain a lot of investment wisdom in this way.

Warren Buffet at the general shareholders meeting (2003)
Confronting one’s own views with the opinions of people who have been successful in investments is a very important factor in the development of the investment path. That’s why choosing the right idols is very important.

2. Be ready to change your views

An important element on the road to success is choosing your own investment path. Buffett’s example, however, shows that it is never a finished job. Investment methods must evolve, they must change. If we follow Warren Buffett’s investment history, we will notice that the investment decisions that he makes now are based on completely different premises than he used to be.

Benjamin Graham instilled in Buffett the need to analyze the financial situation of companies. He taught him how to invest in solid, low-value papers on the market. With time, however, it became increasingly difficult to find such investment opportunities. Already in the 1960s, Buffett changed his approach a bit and started searching for companies, not so much underestimated but overrated by temporary troubles.

The approach to buying good companies at bargain prices also had to change over time. The aforementioned Charles Munger convinced Buffett to the next stage of the evolution of the way of investing. He showed him the meaning of investing in a very well managed company, but not necessarily at a low price. That’s how they bought See’s Candies in the 1970s, where they make a fortune on dividends. In the following decades, the investment vehicle led by Munger and Buffett invested in such brands as Coca Cola or Washington Post. They were neither cheap companies nor showing temporary problems. For that they were very large companies with a strong, established position in the world.

World is changing. So let’s not be afraid of revising our own investment assumptions. If something stops working, you have to think about why it is and rethink your strategy. Let’s take an example from Warren Buffett. His approach is still evolving. This is well demonstrated by his recent investments in technology companies such as Apple, even though he would not touch them under any circumstances even a dozen or so years ago.

3. Passion, commitment and happiness

In addition to good advisers and awareness of changes, you also need to have some luck. Buffett himself says that he “won the lottery lottery ticket” because he was born in the right place at the right time, but he emphasizes that he would not be successful without his love and commitment to what he does.

I was lucky because at the young age I knew what to do. I was also lucky to have access to books and extensive education in my youth. The most important thing is that I really love what I do.

He told Warren Buffett at a meeting with students in 2005.
Buffet emphasizes that passion is needed. Equally needed as patience, a certain dose of intelligence and rationality. In this way, you will help happiness and find the right investment route and the right teachers.