Warren Buffett, the CEO of Berkshire Hathaway, is considered to be the most trusted investor in the world.
What's Buffett's Philosophy?
The key to Buffett's investment philosophy: Rather than focusing on the market as a whole, simply identify a good business and buy it at a bargain price; then hold the shares in the company for the long term.
The main principles Buffett uses are:
- Use a wide margin of safety
- Think for yourself, apply stern discipline and a mind that is independent
Margin of Safety
The margin of safety is the central concept of Buffett’s art of business-like investment. He likes to buy consumer monopolies with a huge margin of safety.
Once you seize the concept of a margin of safety, or buying at bargain prices, then eventually the intrinsic value will surface the way a barrel trapped under the ice will pop to the surface in the spring thaw.
You have only to interpret the balance sheet and decode the numbers to prove the money is there. The bigger your margin of safety the more success you will have with investment.
Lucas Remmerswaal has studied Warren Buffett's philosophies for over 13 years and has written numerous articles. His upcoming book on Warren Buffett will simplify investing strategies for you and give an insight into Warren Buffett’s thinking.
What's Buffett's Advice?
- What is the Buffett philosophy?
- Who influenced Buffett and the way he thinks?
- Which books do you need to read in order to understand how Buffett thinks?
- Would Buffett think now is the right time to act?
- How does Buffett choose companies with an identifiable consumer monopoly?
- How do we find the questions Buffett asks before he makes an investment decision?
Buffett explained his "20 punches" approach to investing.
"You’d get very rich," he said, "if you thought of yourself as having a card with only 20 punches in a lifetime, and every financial decision used up one punch."
Think for Yourself
The intelligent investor thinks for himself or herself but does not ignore what the market is saying. It’s your job to analyse the prices and decide whether it’s to your advantage to act.
As The Intelligent Investor says: "The manic-depressive Mr Market does not always price stocks the way an appraiser or a private buyer would value a business. Instead, when stocks are going up, he happily pays more than their objective value, and when they’re going down, he is desperate to dump them for less than their true worth."
