Investing basics: How to invest like Warren Buffett
In Warren Buffett’s latest newsletter he spoke about Investing Basics.
For the full article thanks to Warren Buffett and Morning Star click here: Investing basics – How to invest like Warren Buffett
And, here’s the summary:
- Don’t Lose Money
- Buffett’s first rule is: “Don’t lose money. And the second rule is: Don’t forget the first rule.”
- This reflects his focus on avoiding permanent loss of capital.
- Use a margin of safety—buy stocks at a significant discount to their intrinsic value.
- Be Patient and Disciplined
- Buffett emphasizes temperament over intelligence.
- You don’t need to act constantly—sometimes the best move is to wait.
- His partner Charlie Munger calls this the ability to “sit on your ass.”
- Use the Stock Market Wisely
- Avoid over-stimulation from financial news and daily price checks.
- Think long-term and only act when you find a great opportunity.
- Buffett likens investing to baseball: wait for the perfect pitch.
- Know Your Circle of Competence
- Focus on industries or businesses you understand well.
- You don’t need to know everything—just stay within your area of expertise.
- Do Your Own Research
- Read annual reports, CEO interviews, and earnings call transcripts.
- Understand the people behind the business—their motivations and integrity.
- Avoid Leverage
- Buffett warns against borrowing to invest, as it increases risk.
- Look for Economic Moats
- Invest in companies with sustainable competitive advantages and high returns on capital.
- Think Independently
- Don’t follow the crowd. Make decisions based on your own analysis and reasoning.
- Read Widely
- Buffett and Munger are voracious readers. They recommend reading across disciplines, not just finance.
- Be Contrarian When Needed
- “Be fearful when others are greedy, and greedy when others are fearful.”
