Warren Buffet has been hovering around the No. 5 spot on Forbes’ Real-Time Billionaires list for quite some time now. With a net worth of $139 billion, the “Oracle of Omaha” is one of the most successful investors the world has ever known.
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As of April 4, the Berkshire Hathaway co-founder, chairman and CEO sits sixth on Forbes’ rankings. At 93 years old, Buffett is a sterling example of someone who figured it out at an early age and rarely wavered from his core financial beliefs.
Notoriously frugal — he eats a cheap McDonald’s breakfast every day and lives in the same Omaha home he bought for $31,500 in 1958 — Buffett made his first million in 1962 at the age of 32, when his Buffett Partnership was valued at over $7 million and his shares worth over $1 million. He became a billionaire in 1985, according to CNBC Make It.
How Does Buffett Do It?
From buying his first stock at the age of 11 to making his millions, then billions, of dollars, Buffett has been in the investing game a long time and has learned some hard lessons along the way. But when it comes to building wealth, “The Oracle of Omaha” really only has a handful of fundamental investing rules that he lives by. Here are three.
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Learning Never Ends
The benefits of reading are numerous. According to the Financial Post, Buffett recommends reading 500 pages every day, believing “that reading builds up knowledge like compound interest.” By learning everything about a company, market or stock, your decision to invest will be informed rather than speculative.
Writing about his friend almost 30 years ago, Bill Gates confirmed Buffett’s dedication to reading and research. “When he invests in a company, he likes to read all of its annual reports going back as far as he can,” said Gates. “He looks at how the company has progressed and what its strategy is. He investigates thoroughly and acts deliberately — and infrequently.”
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Value-Oriented Investing
Of course, it’s value-oriented investing which has earned Buffett his reputation as the greatest investor of our generation. Value investing, which involves buying undervalued stocks or assets with the potential for future growth, comes from researching and recognizing companies with strong fundamentals.
Buffett sticks to companies he’s comfortable with, ones that are established but are undervalued relative to their intrinsic value. For Buffett, companies that have consistent earnings and which display principled and dependable management have tended to pay off in the long run.
Slow and Steady Wins the Wealth
Writing about his friend three decades ago, Bill Gates stated that despite having opportunities to offload companies when they’re at their peak value, Buffett “just won’t sell their stock no matter what the price is. I think his reluctance to sell is more philosophical than optimization driven, but who am I to second-guess the world’s most successful investor?”
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Buffett is spectacularly patient, but his general unwillingness to sell is based on placing importance on value growth over time. If you do your research and believe in the prospective value of your investments, you’ll be able to realize the riches that compound interest can provide. Relying on timing the market and excessive trading are foreign concepts to Buffett.
