HOW DID WARREN BUFFET BECOME SO RICH AND WHAT CAN WE LEARN FROM HIM?

HOW DID WARREN BUFFET BECOME SO RICH AND WHAT CAN WE LEARN?
When did he Buy Berkshire Hathaway?

In 1962 Warren saw a great opportunity to invest in a textile company called Berkshire Hathaway. Warren started to buying major shares after a dispute.
Other differences between the two was that Graham relied on quantitative methods to dive into a company that has potential. Graham relied on quantitative methods to a far greater extent than Buffet. Instead Buffet spent his time actually visiting companies, talked with the management and understanding the corporates particular business model. As a result, Graham was more comfortable investing in lots of smaller companies than Buffet was. Consider a baseball analogy, Graham was concerned about swinging at good pitches and getting on base, Buffet prefers to wait for pitches that allow him to score a home run. Many have credited Buffet with having a natural gift for timing that cannot be replicated, where grahams method is friendlier to the average investor.

Warren buffets investments have not always been successful, but they were well thought out and followed rules of value investing. He kept an eye out for new opportunities and sticked to a consistent strategy, warren is considered to be one of the most successful investors of all time. But you do not have to be a genius or full of talent to invest successfully over a lifetime. Warren buffet claims that all what is needed is a sound intellectual framework for making good decisions and the ability to keep your emotions in control.

Buffet says that you should not watch the market closely, if there is dramatic shifts occurring in the world, you should not become concerned. He says that you should not invest if you are buying and selling stocks and worry if the investments go down a little bit and think they should sell them if they go up. This strategy will lead to losses in the future according to Warren. Buffet says that investments should be held long term. Money is made when your investments are owned for a long period of time. Warren also says that if you buy good companies they will do fine 10 to 30 years from now. Buffet also explained that the markets are always going to be volatile, so the best thing any investor can do is to keep a level head.

Warren buffet spends 80% of his day reading, from the moment he wakes up buffet starts by reading the newspaper. He says that the key to his success has been to read 500 pages a day. That is how he built his knowledge. Out of all the investing legends out there, buffet has the best track record for beating the markets.


So what are warren buffets top rules to get rich?

Number one) Reinvest your profits. When you first make money you might be tempted to spend it. You should not. Instead reinvest the profits. Buffet learned this early on. IHe knew about the power of compound interest which he had been taught. This is why Berkshire Hathaway does not pay out dividends. Instead he reinvests that money back into the company to acquire more businesses and earn a higher rate of return.

Number two, limit what you borrow. Buffet has never borrowed a significant amount of money. He has gotten many letters from people who thought their borrowing was manageable but became overwhelmed by the debt they incurred. His advice is to negotiate with creditors to pay what you can. Then you are debt free. Work on saving some money that you can use to invest instead. Warren says that he never wants to end up in a position where he relies on someone else for financial support.

Number three: assess the risk

Warren buffet judges risk very differently from most of the rest of the investment world. On Wall Street and MBA classrooms across the country, risk is often synonymous with volatility. Buffet does not agree to this. Buffet says that risk is simply the probability of loosing your initial investment. And that is not something you can mitigate through diversification, options or other portfolio management strategy. For warren, if there is risk he simply stays away.

Number 4 do not underestimated the power of compound:
Compound interest is such a powerful yet neglected idea that Albert Einstein famously called it the eight wonder of the world. He who understands it, simply earns it. He who does not pays it.

99% of warren buffets wealth was acquired after his 50th birthday. It is not the answer many expect to hear but when you think about it, it is actually more empowering. The work you put in today no matter how small, can bring monumental change as long as you stick with it. For example, it is rare to see a cyclist under the age of 28 win a huge race like tour de France. Because it takes them years to build the strength, stamina and mental fortitude it is needed to win. As long as you put in the work and focus on the future like warren did with his investments. You will be guaranteeing huge returns on the time you invest.