Lessons About Wealth From Warren Buffett

I’ve spent a great deal of time researching one of the world’s most successful and wealthiest investors, Warren Buffett. I believe that each and every one of us can learn something from the principles he uses when investing his capital.

Here are the top 10 lessons about wealth pulled straight from Warren Buffett’s books, articles, and biographical information:

1. He established his own set of rules for investing and follows them with each and every investment he makes. The strict adherence to these rules have saved him from making costly mistakes due to impulse buys.

2. Buffett is continually learning and self corrects as a result of his knowledge. He once stated, “We’ve made significant money in certain common stocks because of the lessons we learned at See’s.” He was commenting on his investment in the See’s Candies company, which provided an excellent return. From the experience, he extracted many lessons that were applied to future investments.

3. He used mentors and learned a great deal from their experience.

4. Buffett always looks for good companies that are available for a fair price. He doesn’t wait for a deal to come to him; if his research shows a company is worth investing in, he does so immediately. He then holds the investment long-term to make as much money as possible.

5. He is an independent thinker who doesn’t care what the pundits are saying. Buffett doesn’t listen to what others think about the value of the market or the direction it is headed. His core principle of buying good companies at reasonable prices withstands the test of time and market conditions. His decisions are based upon his own experience, rules and knowledge.

6. Buffett lives well below his means. He learned the value of a dollar and how to discipline himself to save at an early age. Although he could reside in a huge mansion anywhere in the world, he has lived in the same house for over 30 years.

7. A tangible goal with every investment is to increase the intrinsic value 15 percent each year.

8. Buffett knows the value of sticking with what he knows; he avoids businesses in industries he does not understand. His investment portfolio is comprised of certain types of businesses and he refuses to add companies that don’t fit the profile.

9. His year-to-year (short-term) earnings are not a primary focus. Instead, he relies on four- or five-year averages to determine how well his investments are faring. This is a vital lesson for fledgling real estate investors who tend to quickly get upset or frustrated with their short-term return on investment. Making a snap decision to sell a property that is not performing well today can be a big – and costly – mistake.

10. Buffett places a great deal of importance on a company’s management team. Nearly every company he purchases is allowed to keep the existing management team to continue running the company. He doesn’t invest only in businesses, he invests in human resources, as well.

Let’s face it, when you want to learn how to do something, you seek out an expert, right? I can’t think of a more successful investor than Warren Buffett. You would be wise to take heed of the principles, rules, and systems he uses and apply them to your own investment strategy.