Most investors will know the many pearls of wisdom of Warren Buffett.
One of the richest men on earth is also one of the most prolific stock market writers. His mantras can be found scattered across the Internet.
But far fewer have read the inspiring advice that made the Berkshire Hathaway CEO the billionaire he is today.
I’ve picked three of his favourite books to show you exactly how I think you too can get rich, and stay rich.
Pick then stick to get rich
There’s a good reason that Philip Fisher’s Common Stocks and Uncommon Profits has stayed in print since 1958. And why Buffett considers Fisher’s work so useful.
One of Fisher’s best quotes reads: “Finding the really outstanding companies and staying with them all through the fluctuations of a gyrating market proved far more profitable to far more people than did the more colourful practice of trying to buy them cheap and sell them dear”.
No matter if you’re 25 or 65, markets will rise and markets will fall throughout your investing journey.
I follow Fisher’s principles by holding really outstanding FTSE 100 and FTSE 250 companies like Legal & General and Games Workshop. I win twice by collecting my dividends and gaining when their share prices improve. I’ll only stop buying if and when their investment cases change dramatically.
Warren Buffett says don’t worry
Buffett calls Tim Geithner’s Stress Test: Reflections on Financial Crises a “must read” for anyone interested in financial crises. It’s a first-hand look at how Barack Obama’s Treasury secretary shepherded the U.S. through the 2007–09 economic meltdown.
The former central bank chair did not predict a 2020 stock market crash triggered by a global pandemic. In fact, in Stress Test he writes, “Financial crises can’t be reliably anticipated or pre-empted, because human interactions are inherently unpredictable“.
So I try not to worry about the future. And I don’t waste time trying to time the market. Instead I pound-cost average into the best FTSE 100 and FTSE 250 companies. I build up my positions over time, adding when the market undervalues them and when it raises them higher.
Use time, don’t lose it
In his 2012 annual letter to Berkshire Hathaway shareholders Buffett specifically recommends John Bogle’s The Clash of Cultures. The Vanguard CEO transformed the investing world in 1976 by creating the first ever publicly available index fund.
Any of Bogle’s books could have easily made the Warren Buffett reading list. 2010’s Common Sense on Mutual Funds urges us to “rely on the ordinary virtues that intelligent beings have relied on for centuries: common sense, thrift, realistic expectations, patience and perseverance“.
Few investors have patience, says Bogle. Simply by picking good companies and sticking with them you can outpeform the vast majority of your peers. And anyone can be a good investor if they can ignore the Fear of Missing Out.
In Clash of Cultures he continues this theme: “Time is your friend. Impulse is your enemy. Take advantage of compound interest and don’t be captivated by the siren song of the market,” he writes.
I believe it is only by thinking critically and keeping a long-term outlook that we can truly gain an advantage in the stock market. If it’s good enough for Buffett, it’s good enough for me.
