Key lessons from warren Buffet’s letters to the investors: If you are familiar with the stock markets investment or list of world’s wealthiest persons then you might have heard the name of billionaire investor Mr Warren buffet. One of the things Billionaire investor Warren buffet is known for is his letters to the investors of his company Berkshire Hathaway. These letters which are closely followed by investors all over the world contain investing lessons from the years of experience of Mr Buffet.
These are the lessons Buffet puts on the paper while discussing the operations of Berkshire in the letters that he writes to his investors every year. In this post, we share few lessons one can learn from these letters.
Key lessons from warren Buffet’s letters to the investors
Investment in the stock is no different from investment in the business:
Buffet says that one should consider the investment one makes in the stock purchases as the sum that is invested directly in the business operations of the companies. So, it is very essential to evaluate the businesses based on their current operations and future plans rather than based on the ongoing rallies or the short term up and downs of the company’s stock in the market.
If the company’s business does well, the stock will eventually follow it:
Speaking of the Coco Cola and the his company’s investment in coco cola’s stock, Buffet says that the business model of the coco cola touches the lives of many people by way of its variety of product range that are consumed across the globe in millions daily. So, Buffet says that his investment in Coco cola is will be held forever. And wherever buffet goes, he never stops talking about coke. And he says that one should look at the growth prospects and long term sustainability of the businesses while making a decision to invest.
The best & buffet’s favorite holding period is forever:
Buffet says that investment in stocks should be a long-term game. When asked about how long one should hold the stock of a company he buys, Buffet says that our favorite holding period of the shares we buy is forever and one should not hold a stock for 10 minutes if he does not wish to hold it for 10 years. Thus Buffet emphasizes long-term investments to make good gains in the market. However, it does not mean that one should still hold his investment in the company while it’s on the verge of going down permanently.
Buffet says “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”. Buffet says that he learnt the art of value investing from Benjamin graham according to whom it’s always better to buy a stock when its price is less than the value it offers in the years to come. Following this principle, Buffet invested in stocks of many companies during the times of 2008 financial crisis that had hit the US economy very hard. Personally Buffet has lost $23 billion in the financial crisis of 2008.
Don’t borrow too much money:
When asked about what has gone wrong with Donald trump, Buffet has said that he has seen people losing because of liquor and leverage. And Trump hs lost it because of leverage i.e. his excessive reliance on debt. Buffet in his 2017 letter to his investors warned them not to buy stocks using borrowed money.