Featured Posts

Why I still Invest in Apple Let's face it -- most of us are Apple investors. If you deny, look at top ten holdings of any mutual fund that you own. Unlike old superstar stocks of the past -- Intel, Microsoft or Dell to name a few -- there is something unique about Apple. It has brand... Read more

How to Choose a Real Estate Agent in India For India’s vast middle-class, buying a house is a dream come true. Many will save over decades to find one or two properties that are the perfect size, in the perfect location, for a good price. Considering the size of the Indian real estate market, this... Read more

3 Risky Investment Properties To Avoid Note: This is a guest article by Tali Wee of Zillow All investments carry some form of risk and real estate properties are no exception. First-time real estate investors exploring the most lucrative opportunities must complete their due diligence before... Read more

Seven Ways in which Small Businesses Are Reducing Overhead Costs As a small business owner, you want to keep overhead expenses low to see the biggest profit margin. Of course, some expenses are essential, but that does not mean they have to be high. Savvy business owners are making the most of a number of different features... Read more

lnvestment Lessons from Warren Buffett Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays. -- Warren Buffett While Warren Buffett... Read more

Six Things to Know Before You Start a Fashion Business The fashion industry may seem quite overwhelming to someone trying to get their name out there and open a business. Prior to laying out the plans for said business, the owner should step back and take a look at the broader picture. There are six important things... Read more

Is Tesla Still a Worthy Investment? "Is Tesla still a worthy investment?," asked a friend of mine who read my article which I wrote back in June of last year. A lot has happened since then. Tesla stock has doubled in price and Elon's presence in the media is omnipresent. This guy is one of... Read more

Year 2013: My Favorite Personal Finance Articles It is hard to believe but, indeed, year 2013 is in the box. For stock investors, it was a banner year. Nasdaq finally climbed back to its old highs and other indices performed brilliantly as well. While pundits on the Street may have tried their best to... Read more

That Mutual Fund is Robbing Your Retirement "I don't take risk, so I invest in a mutual fund," said a friend with a smirk. He is not alone. I have known many friends who take pride in handing their hard-earned money to the Wall Street gang. If you are one of the proud mutual fund investors, I am about... Read more

How to Make Money Online Internet has definitely transformed our world. From a street smart's perspective, Internet has ushered a new era of knowledge that was confined in the walls of libraries around the world. It has also made harder for biased journalism to twist facts and control... Read more

How to Invest Money in Any Market [caption id="attachment_4819" align="alignleft" width="640"] photo by: Grant Wickes[/caption] Let's face it, not all investments are made equal. How to invest money is  as much or more important than how to earn and save money. I have known many friends who... Read more

Mr. Money Mustache and Jim Collins: An Interview [caption id="attachment_4746" align="alignleft" width="640"] ....photo by: timmycrockery[/caption] Mr. Money Mustache is the Babe Ruth of the early retirement zealots on the blogosphere. His fiery style with a touch of badassity has inspired thousands around... Read more

Get Free Articles!

Proud Member of Yakezie

lnvestment Lessons from Warren Buffett

Warren Buffett

Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays. — Warren Buffett

While Warren Buffett remains the greatest investor ever, most of us mere mortals  are trapped in our own paradigm — stock market is a loser’s game!

The oracle of Omaha not only lives a simple life but also provides his wisdom freely through his annual newsletter to his share holders.

His uncanny ability to make plausible case for simple ways to build your wealth is brilliant.

In his 2013 letter, I found pearls of wisdom that I think are worth sharing with you.

According to Warren Buffett, a successful investor invests when he/she can project return on investment without any speculation. If investment is based on pure speculation, he recommends looking for a better investment opportunity.

In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier. I knew nothing about operating a farm. But I have a son who loves farming and I learned from him both how many bushels of corn and soybeans the farm would produce and what the operating expenses would be. From these estimates, I calculated the normalized return from the farm to then be about 10%. I also thought it was likely that productivity would improve over time and that crop prices would move higher as well. Both expectations proved out. — Warren Buffett

Lesson: You don’t have to be an expert to follow simple logic behind the land purchase Warren made. All you need is common sense and someone who can provide insight(like Warren’s son) to project future return on investment. And once you decide to invest, stay put for a long haul without allowing market conditions to influence your decision. A year later, 1987, market crashed but due to his persistence, Warren now owns the land free and clear and it is worth many times more than his initial investment.

In 1993, I made another small investment. Larry Silverstein, Salomon’s landlord when I was the company’s CEO, told me about a New York retail property adjacent to NYU that the Resolution Trust Corp. was selling. Again, a bubble hard popped – this one involving commercial real estate – and the RTC had been created to dispose of the assets of failed savings institutions whose optimistic lending practices had fueled the folly. Here, too, the analysis was simple. As had been the case with the farm, the unleveraged current yield from the property was about 10%. But the property had been undermanaged by the RTC, and its income would increase when several vacant stores were leased. Even more important, the largest tenant – who occupied around 20% of the project’s space – was paying rent of about $5 per foot, whereas other tenants averaged $70. The expiration of this bargain lease in nine years was certain to provide a major boost to earnings. The property’s location was also superb: NYU wasn’t going anywhere. — Warren Buffett

Lesson: Location is the most important factor for real estate investment. This investment also shows Warren’s business acumen. Even though he didn’t know anything about this commercial property, he knew that future return will grow as the anchor tenant paid substantially less rent than other tenants.

Warren Buffett  is using these anecdotal personal investments to teach us an invaluable investment lesson.

I have good news for these non-professionals: The typical investor doesn’t need this skill. In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th Century, the Dow Jones Industrials index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal. — Warren Buffett

Lesson:

1. Don’t allow experts to influence your investment decisions. Invest in an Index fund(Preferrably Vanguard) to keep low expense ratio.

2. Don’t allow daily ticker fluctuations to influence your investment decision either; A climate of fear is your friend when investing; a euphoric world is your enemy.

My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers. — Warren Buffett

Elsewhere:

1. Stocks — Part XXIII: Selecting your asset allocation  via Jlcollinsnh

2. Stock Investing Series via Jlcollinsnh

3.  First Test of Independence via MadFientist

 photo by: J D Morri

Related Posts Plugin for WordPress, Blogger...

Comments (6)

Hi Shilpan…

Great to see you posting again! I know your various business interests have kept you plenty busy of late.

As always, thanks for the links!

Hi Jim,

Yes, it’s been tough lately to get time to write. :)

I second Jim’s comment…glad to see you posting again :) Hope you’ve been doing well!

Yes, I am. When you visit Atlanta, please let me know. I’d love to meet with you.

I am hoping to meet Jim when he goes through Atlanta in August as well.

Absolutely! Our US travel plans are up in the air at the moment, due to delays with selling our house, but I’ll keep you posted. Hopefully we are still able to make it through Atlanta because it’d be great to meet up!

I look forward to it!

Post a comment