What can we learn from Warren Buffet?

All this week on my blog, I will be looking at the lives of wealthy and successful individuals to see what lessons we can extract. Up first is Warren Buffet, a man known for investing in the right companies.

Let me begin by saying that although I think that stocks can be a decent asset to invest in as long as they meet certain requirements, I still prefer real estate because it has been a proven money maker for centuries. With that in mind, I found the following comments by Warren Buffet – known as “The Oracle of Omaha” for his stock-buying prowess – very interesting. He posted an article to CNN where he talked about a farm that he had bought almost thirty years ago and how he decided that it was a good investment:

“I needed no unusual knowledge or intelligence to conclude that the investment had no downside and potentially had substantial upside. There would, of course, be the occasional bad crop, and prices would sometimes disappoint. But so what? There would be some unusually good years as well, and I would never be under any pressure to sell the property. Now, 28 years later, the farm has tripled its earnings and is worth five times or more what I paid. I still know nothing about farming and recently made just my second visit to the farm…

I thought only of what the properties would produce and cared not at all about their daily valuations. 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…”

What a down-to-earth guy! Instead of beating his own drum and talking about how smart he was to buy that farm, he simply points out the fact that making a simple calculation let him evaluate the investment. He found the right people to run the farm for him, and despite the ups and downs of the economy during the past 30 years he has continually been satisfied with his purchase.

Later in the article, Buffet went on to talk about the folly of living or dying with each new financial report that comes out and with each rise or fall in the NASDAQ or NYSE. He wrote:

“It should be an enormous advantage for investors in stocks to have those wildly fluctuating valuations placed on their holdings — and for some investors, it is. After all, if a moody fellow with a farm bordering my property yelled out a price every day to me at which he would either buy my farm or sell me his — and those prices varied widely over short periods of time depending on his mental state — how in the world could I be other than benefited by his erratic behavior? If his daily shout-out was ridiculously low, and I had some spare cash, I would buy his farm. If the number he yelled was absurdly high, I could either sell to him or just go on farming.

Owners of stocks, however, too often let the capricious and irrational behavior of their fellow owners cause[s] them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits — and, worse yet, important to consider acting upon their comments.”

Warren Buffet gets it. Why don’t most financial advisors? I think that if you have to choose who to listen to – billionaire Warren Buffet or the financial advisor from down the block – your choice is pretty clear.


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