6 Investing Lessons From the Richest Man in the World — Warren Buffett
Six timeless lessons from Warren Buffett on spending wisely, valuing companies correctly, avoiding losses, and managing debt.
Tejas Shah
Proprietor of Silicon One and Silicon Systems, AMFI-registered Mutual Fund Distributor since 2004, based in Vadodara.
Warren Buffett, the Oracle of Omaha, is no stranger to the world of investing. There's a lot to learn from the most successful — and richest — investor in the world. Here are six lessons you can use to invest better.
1–2: Spend wisely, and know that price isn't value
"If you buy things you don't need, you will soon sell things you need" — spending wisely isn't about being miserly, it's about being smart with what you invest instead. "Price is what you pay, value is what you get" — the price of a stock is mostly governed by market sentiment, not the company's intrinsic value; buy quality when it's marked down.
3–4: Buy wonderful companies, and be loss-averse
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price" — mediocre companies give much lower returns over the long term even at bargain prices. And: "Rule #1, never lose money. Rule #2, never forget Rule #1" — focus on undervalued companies you understand with long-term potential, rather than chasing every possible profit.
5–6: Be tax savvy, and limit what you borrow
Understand the tax implications of an investment before you make it — a Bank FD paying 9% can fall to barely above 6% after tax in a 30% bracket, below inflation. And borrow only when absolutely necessary, understanding all the fees involved — a phone bought on EMI loses value from the moment of purchase, on top of the hidden processing costs.
