Warren Buffett, the legendary investor and chairperson of Berkshire Hathaway, is one of the most well-tracked stock market voices globally. Those who have long been believers in Buffettology understand his simple and direct approach to investing.
In an old video, making rounds on the internet, another one of his investing lessons has come to the fore, where the now 95-year-old Buffett is seen recommending easy rules to achieving success in the stock market.
Warren Buffett is seen as saying that successful investing has little to do with complex models or market predictions, and more to do with discipline, self-awareness, and rational thinking.
Buffett’s investing gems to become a successful investor
1. Define your circle of competence
In the first part of the video, Buffett is seen stressing the importance of self-awareness and being realistic when it comes to investing. He said that it is essential to clearly identify what they understand.
“You have to define your circle of competence accurately,” he said. According to Buffett, apart from knowing what you understand, it is equally important to “know what you don’t know and not get enticed by it”.
2. Maintaining rationality over greed
Speaking about his long-held investing philosophy, Buffett warned that unchecked greed is one of the biggest enemies of long-term returns. “If you’re very greedy, it’ll be a disaster,” he said, adding that excessive desire for quick gains eventually overwhelms rational decision-making.
3. Employing the basic business-focused approach
Buffett credits much of his investing philosophy to the teachings of Benjamin Graham, whose ideas he believes remain unmatched even after decades of market evolution.
He said that this basic approach requires you to think about stocks as businesses, and then evaluate what makes a good business. Central to this methodology is having a margin of safety, said Buffett.
4. Practising discipline and independent thought
Buffett suggested that the investing process is “not a complicated process,” but it definitely requires discipline.
He said that it is necessary to insulate yourself from popular opinion because you cannot pay any attention to it, as it “just doesn’t mean anything”.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
