Warren Buffet is known today as the world’s greatest investor. If you had put 1000$ in his investing company when he first initiated it, it would be worth over 17 million dollars today. He has much advice on how to invest for beginners.
Now how did Warren Buffet achieved such a high return? This is the result of smart investing and sticking to some key investing principles. He told himself about many of them on different occasions.
Warren Buffet HR Management:
According to him, his company looks for three things when they hire people. Intelligence, initiative or energy, and integrity. If people don’t have the last one the first two things can kill them. It means without integrity there is no need for energy and intelligence.
How to Plan Investments?
The investors behave in very human ways which are they get very excited. They like to invest more and more when they get profits during the market bull. Similarly, they also think the opposite if they face loss. He said he rather buy a wonderful business at a fair price than a fair business at a wonderful price. Long term planning gives much better returns on investments.
Where to Invest Money?
Warren Buffet told that he has an old fashioned belief that he can only expect to make money and things that he understands. By that, he doesn’t mean an understanding of a product or service. He means the economics of the business or likely to look like 10 or 20 years from now. He mentioned that he knows in general what the economics will say Wrigley Chewing Gum (A chewing gum Manufacturing Company) will look like 10 years from now. The internet isn’t going to change the way people chew gums and which gum they chew. So if you own a chewing gum market in a big way, you will be there after 10 years. So evaluating Wrigley is within what he calls his circle of competence. He understands what the company does, economics, and competitive aspects of the business.
Warren Buffet Mistakes:
He said that the biggest mistakes he made so far are mistakes of omission and not commission. It means the things he knew enough to do and were within his circle of competence and he became lazy to them. There are big opportunities in life that have to be seized. We never do many things but when we get the chance of doing something right and big, we have got to do it. You can always do it on a small scale instead of making a mistake by not doing it at all.
Selling a Business:
Another important success principle he mentioned is that he will never sell the business for a reason he is getting a high price for them. He said he may sell businesses if they get discouraged with the management. Another reason for selling may be that if they think that economic characteristics of the business change in a big way. Selling businesses only to get high value is not recommended by Warren Buffet.
Buying a Business:
While buying a business or a part of a business he always keeps in mind what will come out of that business and when. He also added that while buying a part of the business he always thinks he is buying the whole business.
It is funny that these simple principles of Warren Buffet that if stuck to over the long term make such a high return. But that’s the way. The wait is a hard thing to do. Only a few investors are capable of being rational and sticking to these guidelines and not giving in to their emotions. Those few can make such high profits and become billionaires.