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Words of Wisdom from the Oracle of Omaha

Updated on January 18, 2015

Warren E. Buffett, chairman of holding company Berkshire Hathaway, is considered by many to be the world’s greatest investor. His track record over the decades has been stellar, earning him the sobriquet “the Oracle of Omaha.” (He is based in Omaha, Nebraska). He believes that investing is most effective when the investor treats his investments as what they actually are: shares of ownership in real businesses and not blips on a computer screen ready to be bought and sold on a whim. He states, “If you think you can make money by weaving in and out of stocks, I would like to be your broker but not your investment partner.”

His investment strategy is the exact opposite of that peddled around elsewhere by so-called market professionals who believe in the standard bromide of diversification and “not putting all your eggs in one basket.” Buffett’s is the focused approach and he can be quoted as saying, “Put all your eggs in one basket but watch that basket carefully.” He believes in holding for the long-term: ”The best time to sell a good company is never.”

Warren Buffett speaking to a group of students from the Kansas University School of Business
Warren Buffett speaking to a group of students from the Kansas University School of Business | Source

Buffett invests mostly in companies that manufacture low-tech products that have a reputation for consumer and brand loyalty. He has achieved spectacular results not by investing in that hot new technology stock but in companies such as Coca-Cola, Fruit of the Loom, Dairy Queen, and GEICO. He has, however, ventured into the technology arena with a stake in the monolithic IBM.

He attributes his success to having the right role models (or heroes) early in life and being born in the right place at the right time. His father, first and foremost, instilled in him a deep sense of personal integrity and responsibility. Secondly, his professor in college and mentor, the legendary Benjamin Graham, provided him with the intellectual framework that forms the basis of his investment philosophy. Graham’s pioneering works, notably the book The Intelligent Investor, influence him to this day and he recommends the book to all aspiring investors. Buffett has also stated on many occasions that much of his success can be attributed simply to being born in the twentieth-century United States, a capitalist society. He believes he may not have been as successful in some other country where the free-enterprise system is not as flourishing and well-established.

In summation, Buffett’s advice on how to succeed in the financial markets is a combination of desirable character traits, sound money management techniques, and investing within your sphere of personal competency. Without integrity, high intelligence can be a liability. Having an intellectual framework to guide you is crucial. And invest in what you understand. This is what has earned Mr. Buffett the informal title of “The World’s Greatest Investor.”

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