Throughout history, there have been almighty few true titans when it comes to successful investing. Warren Buffett is one. Though he began his fortune with little money of his own, Buffett built an investment company along the way (Berkshire Hathaway) that would eventually create a personal net worth of almost $50 billion dollars. And how many investors earn not one nickname but two? In media stories about the man, he is often referred to as either the Oracle of Omaha, or the Sage of Omaha.
But what can you, as a wet behind the ears investor, learn from this grandfatherly figure who has managed to climb to #3 (Carlos Slim Helo and Bill Gates being #1 and #2 respectively) on the most recent list of the world’s richest men? Quite a lot, if you’re willing to pay attention. Warren Buffet has always eschewed complex mathematical models when it comes to picking stock, and usually is something of a contrarian (which simply means he tends to ignore popular opinion and go his own way). For example, when Goldman Sachs was getting the stuffing kicked out of it during the 2008 recession, and the stock price had slipped to $115, Buffet was all in, investing $5 billion dollars. With a recent closing price of $165, the old man did okay and added several million more dollars to his pile.
What does a simple investing philosophy mean when it comes to picking stocks the Buffet way? He prefers businesses with models easily understood by anyone. Companies like Target, Coca-Cola, Apple, and Wal-mart are good examples. Each has a simple mission: to sell as much of their product to as many people that will buy it. Nothing fancy. Nothing complex. Just solid examples of filling a need in the consumer market.
After simplicity? Buy and hold, baby, buy and hold. And keep in mind that Mr. Buffett didn’t make his first million dollars right out of the gate. He worked at various jobs in the financial industry, learning the ropes, forming partnerships until, finally, at the age of 32 he could legitimately say he had joined the millionaire club. At age 60 he officially became a billionaire in 1990, and his net worth has continued to grow ever since.
Don’t make the mistake of thinking you can become like Buffett overnight. Patience is part of the process. Set a few interim goals, but keep your
eyes on the road and hands on the wheel.
The Young Wealth Team
Flickr / Aaron Friedman