“If I have seen further than others, it is by standing upon the shoulders of giants” – Isaac Newton
We all know who Warren Buffett is, the legendary Oracle of Omaha and the greatest investor of our time. I personally count him as one of my virtual mentors as I’ve been studying him for years now.
Recently, I was doing a lot of research on him and I downloaded some of Berkshire Hathaway’s annual reports over the years and picked out numerous advice he gives to young ones who want to be successful not just in investing but in life.
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Here’s what I learned;
Read:
He was once asked what advice he would give to new investors at the Berkshire Annual meeting in 2007 and below was his response;
“I think you should read everything you can. In my case, by the age of 10, I’d read every book in the Omaha public library about investing, some twice.
You need to fill your mind with various competing thoughts and decide which makes sense. Then you have to jump in the water – take some amount of money and do it yourself.
What do I read?
- Daily newspapers.
- Daily financial publications
- Magazine articles about accounting scandals.
- Annual and quarterly reports of companies.
What decisions to make before investing:
As young investors, Buffett’s advice to us is to be ready to do lots of work and due diligence to ensure that we get our investment decisions right.
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Warren Buffett in the earlier years of his investing career made us aware of what was called the “Scuttlebutt Approach”. This approach meant that he would go out and talk to customers, suppliers, competitors and even ex-employees of a company he wanted to invest in.
If for example, he was interested in an industry, say it was coal; he would go around and see every coal company. He would ask every CEO, “If you could only buy stock in one coal company that was not your own, which would it be and why?”.
Choose the right mentor/hero:
A lot of us think we are too smart and don’t need the help of the older generation.
A key decision we will make is choosing the right mentor to help guide you through the tough journey of life. You have to choose right because you are going to emulate your heroes and failure to do so will create situations that can get us into trouble.
The good thing is that mentors don’t have to be people we know in flesh, we can have virtual mentors by reading their books articles or publications, watching their videos, or even e-mailing them for advice.
Other valuable advice from Buffett to young investors
- Don’t worry too much about your mistakes.
- Don’t learn too much from your mistakes.
- Don’t confuse social progress with the chance to make money.
- Learning to think a lawyer is a valuable trait, but allocate even more of your day to reading than he does.
- Always read (primary) data rather than secondary data.
- Don’t improve your cost of living without improving your standard of living.
- Get the right spouse. Marry the right person because it will make a difference in your life and will change your aspiration and all kind of things.
- Intelligence, Energy, Integrity, Patience and Rationality are critical characters to build.
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