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Hi friend 👋
In two days, I’ll drive from South Dakota to Omaha to attend the annual shareholder meeting of Warren Buffett.
A great time to pass some investment wisdom from The Oracle of Omaha.
In today’s article, I’ll discuss the top 10 lessons from reading over 5,000 pages (!) of Buffett wisdom.
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1. The longer you invest, the better
Warren Buffett is worth over $150 billion today.
Over 95% (!) of this wealth was created after his 65th birthday.
The power of compounding is beautiful.
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2. Do not borrow money to invest
This quote says it all:
“My partner Charlie Munger says there are only three ways a smart person can go broke: liquor, ladies and leverage." - Warren Buffett |
3. Invest in boring companies
Boring companies are usually great investments.
You should invest in what you understand.
If you don’t understand what you buy, you will not be able to make good and rational investment decisions.
Good investing is like watching paint dry.
An example? If you invested $1.000 in Coca-Cola in 1989 and reinvested all dividends, you would collect over $56.000 (!) in annual dividends. That’s 56 (!) times your initial investment.
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4. Invest in companies with great management
The incentives of management and shareholders should be aligned.
Invest in companies where insiders own a large percentage of the stock.
Companies with skin in the game tend to outperform:
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5. Buy quality stocks
In the long term, quality always wins.
Stock prices follow the evolution of the intrinsic value.
As a result, you should invest in great companies that can keep growing their intrinsic value.
What should you look for? Companies with a healthy balance sheet and high margins that can grow their earnings attractively.
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6. Be disciplined
Every investment strategy will underperform the market from time to time.
As an investor, you are running a marathon, not a sprint.
Write down your investment goals and stick to the plan.