Warren Buffett’s investment success boils down to 3 key characteristics that can be determined at the genetic level.
Warren Buffett is one of the most successful investors in history, and he takes the approach known as value investing. We are talking about the opposite pole of quick schemes and so-called speculative investments, an example of which is investment in bitcoins.
Like every American entrepreneur, Warren loves good and big deals, and this may be the secret to his success. However, Buffett himself says something else. He claims that there are three main characteristics useful to an investor in his career. But about these principles of Warren Buffett in investing a little lower.
Buffett’s love of value investing is manifested in different aspects of life, from his phone to the features of his investment portfolio. And he not only was able to save a couple of dollars, but managed to save billions thanks to such an inclination.
The well-known economical billionaire who insists on using a clamshell phone and still lives in a modest house in Omaha, Nebraska – Warren Buffett slowly but surely built his wealth, finding good deals. We know this approach as value investing..
Such a strategy requires investors not just to analyze the fundamental principles of the company, but to study news content. Only with this approach can you make the right decision where to invest. If a stock is valued less than its intrinsic value, the investor will acquire it and hold it until the price rises. However, he will not succumb to any market fluctuations..
It sounds in theory it’s all easy, but you need a certain temperament to achieve the stated goal. Investor Seth Clarman, in the preface to the sixth edition of Graham and Dodd’s Safety Analysis, writes:
“Although it may seem that any person can be a value investor, the main characteristics of this type of investors – patience, discipline and aversion to risk – may well be genetically determined”.
By the way, the book itself (created back in 1934) is one of Buffett’s favorites. According to him, this is the foundation thanks to which he became such a legendary investor, as now.
So, the three main characteristics and principles of Warren Buffett, necessary for investment success, were not invented by Warren himself, but they are often mentioned by him when it comes to his career and personal development.
Patience
“Value investors are not interested in getting rich tomorrow,” Buffett once said at a meeting with students. He noted that people who want to get rich quick will not get rich at all. And there is nothing wrong with slowly getting rich. You need to remember that we all sleep on similar mattresses and eat the same food.
Discipline
Buffett says: “The stock goes up and down, and this is not the game party where the odds are in your favor. But to win this game, where most people lose, you will need the discipline to form your own opinion and the right temperament, which is more important than your IQ level. ”.
Risk aversion
In 2018, in a letter to shareholders, Buffett wrote that “investing is an activity in which today’s expenses are inevitable to provide income in the future, and risk is the probability that the goal will not be achieved.” For Buffett himself, risk aversion is not a craving for safe investments like bonds. He strongly advises long-term investors to create a diversified portfolio consisting of not only stocks, but also bonds.
Seth Clarman speaks out on these characteristics as a whole is very clear:
“When you first study the cost approach, it either resonates with you on the same wavelength or not. Either you can remain disciplined and patient, or not. ”.
However, there is one more thing that any novice investor can do to cultivate the characteristics that are key to assessing the success of an investment. You just need to read a lot, as Warren did..
At the beginning of his investment career, Buffett read 600-1000 pages per day. After decades and earning several billion dollars, he still spends about 80% of his time reading current financial literature.
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Can you provide more insight into Warren Buffett’s principles and approach to investing? What key strategies does he employ that have made him one of the most successful investors in history? Are there any specific principles that stand out and can be applied by ordinary investors like myself?