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Warren Buffett Investment Rules and Books

Updated on April 13, 2014

Warren Buffett: The Sage of Omaha

Warren Buffett is on of the most successful investors of all time and is the primary shareholder in Berkshire Hathaway. He has ranked as the richest person in the world as recently as 2008 and is still probably the second or third richest man in the world despite significant donations to charity.

Buffett was a student of Benjamin Graham, the father of Value Investing and his investment rules and strategies are a model on which to base successful long-term investment and money management.

Warren Buffet: Investment Strategies

Warren Buffet's Investment Rules, Articles and Advice

Buffett has written many articles and books on the subject of investing and his style is Value Investing where shares are bought only if they meet certain criteria that indicate that they are cheap compared to other shares, the market and to the actual value of their assets and business. e.g. companies that are popular and growing fast may be overpriced because everyone knows the story of their success so people over-pay and would therefore be ignored in favour boring stocks that no one wants and are therefore under-priced.

It sounds simple and the basics are, but I would highly recommend reading one of the many books on the subjects of value investing for more detailed insight.

Here are the Basics:

1: Be frugal

Buffett lives in the same modest house in Omaha, Nebraska, that he bought 50 odd years ago and drives his own car.

A frugal investor demands the same quality from managers

Avoid corporate waste, excessive executive pay or perks.

Frugal people don't need fast returns to support extravagant lifestyles

2: Wait for the 'fat pitch'

Resist constantly buying or selling stocks.

"Lethargy bordering on sloth remains the cornerstone of our investment style," (Buffett in his 1990 annual report to Berkshire Hathaway shareholders. Wait a long time until market turbulence brings the "fat pitch", or stocks of great companies trading at really cheap valuations.

3: Be a contrarian

Go against the crowd. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful," (Buffett in a 1986 letter to shareholders)

Be skeptical of the conventional wisdom, not because the crowd is always wrong but because the crowd's wisdom is probably already reflected in market prices (Todd Lowenstein, a portfolio co-manager of the HighMark Value Momentum Fund).

4: Stick with what you know

If you don't understand a company's product or how it makes money, avoid it.

"Stay within your circle of confidence."

During the late 1990s boom, Buffett avoided tech companies, confessing that he could not understand what they did. He looked wrong until the bubble burst.

5: Don't depend on others to say you're right

6: Buy companies cheap

Calculating an "intrinsic value" for a business, by examining what similar companies sell for or calculating the present value of all the future cash flow and build in a "margin of safety" by purchasing a stock well below its intrinsic value.

7: Look for companies with economic moats

A sustainable competitive advantage: A company should have a barrier to entry (a moat) that keeps competitors at bay.

8: Buy big, concentrated positions

Rather than diversifying, when Buffett finds a company he likes, he piles into it in a big way.

9: Hold for life

Buffett's favorite holding period is "forever."

10: Believe in America

Warren Buffett Books

When Money Dies - A Book Recommended by Buffett - Book by Adam Fergusson

Money

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    • BSieracki profile image

      Bernie 4 years ago from Corbin, KY

      i've met him a few times

    • bushaex profile image

      Stephen Bush 4 years ago from Ohio

      I believe that the single most important part of Warren Buffett's success was his decision to be based outside of a money center city where he would have been deluged by the crowd mentality. SquidAngel Blessings.

    • Phillyfreeze profile image

      Ronald Tucker 5 years ago from Louisville, Kentucky

      In her book "The Snowball: Warren Buffet and the Business of Life", author Alice Schroeder strips away the mystery that has long cloaked one of the world's richest men to reveal a life and fortune built on solid financial principles and uncanny insight and vision.

      Sprinkled with Buffets own plain-speaking,the book drops the veil from this iconic figure, revealing the truly human story of a self-made man.

      Author Alice Schroeder was respected insurance analyst and a managing director at Morgan Stanley when she first met Warren Buffet. Her grasp of the financial arena and her access to his files and to himself. Their friendship and mutual respect gave her an insider's look at the man behind the Berkshire-Hatthaway empire.

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      SayGuddaycom 5 years ago

      Love this lens

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      Rowanshayne 6 years ago

      Nice Post ! Thanks for sharing a good information about sofortkredit

    • MargoPArrowsmith profile image

      MargoPArrowsmith 7 years ago

      Warren Buffet is also a good man. "Avoid corporate waste, excessive executive pay or perks."

      He avoids this greed that has nearly destroyed the world's economy AND he knows that graduated taxed are fair taxes, also the ones that will move the economy

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      anonymous 7 years ago

      Without books, the world would starve. Every book had a lesson.We can read it for instruction or entertainment. It can provide knowledge to all ages and education levels.You share a nice lens with Best Books Directory team.

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      Andy 7 years ago from London, England

      @RuthCoffee: I agree. He is a philanthropist and an expert with money. There is so much more to life than just money but his philosophies are relevant to life and to money.

    • RuthCoffee profile image

      RuthCoffee 7 years ago

      I'm definitely not all about money...but he is one of my hero's. (I heard him at Columbia business school...I love many of his philosophies...he gives because he knows he's lucky and not all of us "draw the long straw")