Please enjoy this guest post from Nick who blogs over at BayCrazy.com.
Warren Buffett is often ranked the richest man in the world. With that being said, I think it’s fair to say that he knows what he’s doing. However, just because somebody happens to have the most money doesn’t necessarily mean they’re the best at managing it. However, in Warren’s case it’s more-so about how he made his money, kept his money, and made more of it. And keeps making more of it. I’m writing about WB (how many different ways can I refer to one man?) not only because of his wealth and greatness as a collector and multiplier of money, but also due to his general mindset, life philosophies and integrity. I think there’s perhaps a misconception among those who only know his name and maybe that he’s a ‘fat cat’ or a ‘Wall Street guy’ and just another greedy, ruthless gambler of big money. However, that couldn’t be further from the truth. Study Wazza just a little bit and you will discover a truly interesting, empathetic, intelligent and brilliant man. The big W doesn’t carelessly gamble money or throw multitudes of cash at walls to see what sticks, rather – he makes old-fashioned investments, in companies that he understands. And cares about. And companies that he then jumps on-board to try and improve and make better. He has decent ethics, an amazingly neurotic and detailed gift for analyzing businesses from the ground-up, and an amazingly in-depth understanding of a multitude of financial principles. I really think he’ll go down as one of the most celebrated modern minds in business due to what he stands for, how he goes about his business, and the character he brings to the table. OKAY, enough blathering, let’s get down to business: here’s 3 things you can learn from Warren Buffet:
1. Invest in Companies, not Stocks.
Wozzo’s basic advice is that you see shares as a percentage of a company. I know that sounds obvious, given that ‘you already know a share is that’, but his point is that modern-era investors seem to have lost sight of this and basically gamble and look for quick wins and ‘sure things’, and I really didn’t fully realize how much I think like this myself until he reiterated the reality of the situation. See shares as people and ideas, and your entire perspective can change for the better.
2. Invest in Things You Understand.
Don’t look at what’s ‘hot’ or invest based on what you think may rise or fall next week, month or year. Mr. Buffett wisely advises that you try to truly understand any business that catches your eye. You should try to understand the financial details, the management, the profits, and the growth. Then you should invest as much as you can, into the COMPANY, and stay with them for the long-haul. The goal is to pick winners based on facts, information, and understanding. Stick with those winners based on informed-opinions, as opposed to guessing, hoping, and gambling.
3. Live Well, Well Beneath Your Means.
This one actually speaks to an ideal that many bloggers in this sector aim to achieve on a daily basis. Well, if you want to learn from the best: old man Buffy is the master of living below his means. Although he has such an impressive fortune, he still lives in the first house that he bought and drives his medium-priced (sometimes second-hand) cars until they’re truly done and dusted. He also dines at a local eatery, preferring to eat working-class munchies rather than high-class cuisine. Is he profoundly skimpy? Perhaps, but only by upshot. He’s actually just incredibly stuck in his ways and doesn’t crave material things or flashy items. He sticks to what he understands… just like with investing.
Who is your favorite financial icon? What have you learned from them?