If I were asked to name the one person who taught me more about investing than anyone else, my immediate reply would have to be Warren Buffett.
Legend and all-round good guy
Buffett, nicknamed the Oracle of Omaha, has amassed personal wealth of $120.5bn in his lifetime. As he turned 93 on Wednesday, 30 August, that works out at almost $1.3bn for every year of his life. Or, if I prefer, $3.5m for every day he’s been around. Wow.
Having started buying stocks aged 13, he built his fortune over eight decades. However, he has also created countless other millionaires and even billionaires from his careful stewardship of Berkshire Hathaway. This US conglomerate (in which my wife owns shares) is today worth $786.8bn.
But what makes Uncle Warren my #1 hero is his carefree attitude to his dynastic wealth. Having already donated around $50bn to good causes, he intends to give away 99% of his vast fortune before he dies. In this age of often cut-throat capitalism, this is glorious.
Five marvellous maxims
Here are five investing lessons from Warren Buffett that helped to make me a better investor today.
1. Buy companies, not shares
Earlier this year, Buffett wrote to his shareholders: “Charlie [Munger, vice-chairman of Berkshire Hathaway] and I are not stock-pickers; we are business-pickers.” To be honest, it took me decades to realise that the #1 trick to equity investing is to buy into companies that I’d like to own outright and/or forever. Which brings me neatly to lesson #2…
2. Play the long game
Nowadays, when I buy the shares of any company, I’m not aiming to flip them for a quick profit. Ideally, my goal is to ‘fire and forget’ by owning stocks for many years to come. On this theme, Buffett has remarked: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” Nice.
3. Buy when there’s blood in the streets
Some of my family’s largest returns have come from buying during stock market crashes, most recently during the spring 2020 and 2022 market meltdowns. As Buffett put it in October 2008 (during the global financial crisis of 2007-09): “Be fearful when others are greedy, and greedy when others are fearful.”
4. Look for deeper value
Today, as an old-school value investor, I aim to buy into quality companies at reasonable prices. Also, I know that premium products often come with premium price tags. That’s why I’m willing to pay higher earnings multiples to invest in great businesses. Or, as Uncle Warren wisely remarked: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
5. Back America
In my earliest days as investor (I started out in 1986), I bought only UK shares. Today, a big chunk of my family fortune is invested in US stocks and tracker funds. In his 2021 letter to shareholders, Warren Buffett repeated this wisdom: “Never bet against America.” By following this advice, we’ve made great returns from US stocks, while banking steady dividends from our UK shares (which we continue to buy).
Summing up: happy birthday, Warren Buffett, from an eternally grateful admirer!
