Starting today, I will be starting a brand new series featuring Warren Buffett. I will include a portion of an important quote from each annual letter Warren Buffet wrote to his investors starting at 1977 and write about what I’ve learned to share with all of you. Now if you have been living in a cave with no internet or television let me give you a brief introduction about Mr. Buffett courtesy of Wikipedia. Hence forth WB Lesson Series!
Warren Edward Buffett (born August 30, 1930) is considered by some to be one of the most successful investors in the world. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway, and is consistently ranked among the world’s wealthiest people. He was ranked as the world’s wealthiest person in 2008 and as the third wealthiest in 2015. In 2012 Time named Buffett one of the world’s most influential people.
This man knows what he’s doing and if we want to be successful, we have to emulate what successful people do. They don’t call him the “Oracle of Omaha” just for kicks and giggles. Mr. Buffett started at a young age with a goal to become a successful investor and he has achieved it. What I really like about him is that he seems very humble and approachable. He still lives in the house where he was raised! He bought it in 1958 for $31,500. We’re talking about a man who is currently worth $66.5 billion dollars.
Insurance companies offer standardized policies which can be copied by anyone. Their only products are promises.
Lessons learned: There’s no business better than the promise business. I should start my own insurance company! Berkshire Hathaway (Mr. Buffett’s Company) wholly owns GEICO, one of the largest insurance companies in the United States. Additionally as a customer, we would have to be very careful about the type of insurance we get. Some insurance that I tend to avoid would be Gap insurance for cars or electronic insurance. I feel that those insurances are a waste of money and you can easily pocket that money and create a little savings plan IN CASE something happens. Remember, when nothing happens, the insurance company won’t give our money back.
We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be (1) one that we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price.
Lessons learned: Never invest in a business without doing some valid research about the company. Real money is on the line, money that took part of our lives to earn. Trend company like Twitter or even the mighty Facebook can go away without warning. Remember Myspace? Gone with the dinosaurs. Blackberry? Stick a fork in em. Invest in a company with a stellar record in their business practices. This is where we have to do some deep research. Like a background check. In the long run it will pay off. It’s all about the long game…unlike golf.
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