Want to make millions like Warren Buffett? Here’s how to avoid his mistakes

Just look at that Warren Buffett bloke and all the investing mistakes he’s made over the years… What do you mean, he never makes any?

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People tell us how great billionaire investor Warren Buffett is. But we don’t hear many going on about the things he’s done wrong in his career.

Just think of the money we could have today if we hadn’t fallen into all those Warren Buffett traps“, we never hear.

To be fair, he has achieved an average annual return of 19.8% from shares in his Berkshire Hathaway investing company. And it’s not a one-off, or just for a few years. No, that’s his average from 1964 to 2023.

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Cracking return

In that time, the US S&P 500 made a total of 31,200%, including dividends. But Berkshire Hathaway shareholders enjoyed a whopping 4.4 million percent.

Shame about all those mistakes, though… which I’d bet is not what you’re thinking.

Joking aside, one of the best things investors can do is examine mistakes and see what we can learn from them. That’s our own mistakes, and those of others.

Guru mistakes

Peter Garnry, Saxo‘s Chief Investment Strategist, suggests “By observing the mistakes of the greatest investors like Warren Buffett we should in theory be able to learn faster than doing all the mistakes ourselves“.

Buffett confesses he failed to understand the business models and potentials of Amazon and Google, now Alphabet (NASDAQ: GOOG).

Since IPO in 2004, the Google/Alphabet stock price has risen by more than 6,500%.

Created with Highcharts 11.4.3Alphabet PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

That’s not a nice one to miss out one. But hindsight is a great thing, and it wasn’t easy to understand at the time.

What was it, a search engine? Big deal. What did those other search engines of the early days turn out to be worth today? That’s right, Alphabet is rare among those early starters to still be here, and at the leading edge of AI development today.

Lesson

What are the lessons to be learned from not buying Alphabet stock back at IPO?

Maybe, as private investors, we shouldn’t over-analyse. Right now, I’m far from being an AI expert. But it doesn’t stop me considering Alphabet as a possible buy for that potential.

Then again, perhaps another side is… nobody ever lost money by not buying something. It’s fine to pass something up if we don’t really get it.

Timing

Buffett made a big bet on ConocoPhillips when oil prices were high in 2008, expecting them to stay that way. But the black stuff plummeted, leading Buffett to admit to “terrible timing” with that one.

What’s the lesson this time? Hmm, avoiding trying to time the market wouldn’t get us out of a bad one like that. Maybe it’s to be especially wary of buying any stock that depends on the price of a specific commodity?

Easy one

That’s just a couple of the things Buffett didn’t quite get right. And, to be fair, there aren’t all that many other examples.

But, as Peter Garnry points out, Buffett has been hampered by his success. The more he has to invest, the harder it is to find a worthwhile investment.

So maybe the final lesson is… try not to get too rich. That’s one mistake I’m sure I won’t make.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet and Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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