Learning on your own only from your own mistakes is not the way to go. You must learn from the best in order to be able to keep up, beat your competition and innovate to be ahead of the market.
Warren Buffet is without a doubt, a hall-of-fame investor any way you look at it. But it’s not just his investing that sets him apart from his peers, it’s that he also plans and takes the time to give amazing, incredible advice to the investment community and to his audience.
Before we dive in more about some of Uncle Warren’s famous investing advice and some of my favorites of his investing advice, I want to mention something he said that really stuck with me, and that’s that there are no called strikes in investing.
Personally, I love the competitive aspect of sports, and I really like situations where someone is in a tense situation, everything’s on the line, and you find out how that person’s gonna respond. For Warren, who’s a baseball fan, what he’s referring to is a strikeout in baseball and that weird situation to see an amazing player or a player you’re rooting for getting struck out while they’re just standing there. At that moment, the player must swing to hit the freaking ball.
But investing, it’s actually a lot different than the baseball analogy. The reality in investing is that when you don’t swing, you don’t actually get a strike.
So using the baseball analogy for investing, if even the perfect pitch comes down the middle and you don’t swing at it, that’s actually okay. In a way, you’re wasting your time and you’re wasting your opportunities because the reality is that big opportunities are finite. You don’t have an infinite amount of them, but unlike in baseball, you’re not penalized by not investing.
So the big takeaway from Warren here is that choose your investments wisely, make sure it’s the right choice, and make sure it’s a big opportunity for you so that you know you’re making the right decision. Make sure you do your homework and then swing for the fences and if you want to talk about somebody with a good batting average, let’s take Warrens. If you invested $10,000 in Berkshire Hathaway in 1965, and then all you did was leave it there in Berkshire Hathaway until today, you would have waited for it for $165 million.
So think about that Hall of Fame batting record, $10,000 to $165 million during that period of time. Not only that but Warren is regarded as one of the best investors of all time and is consistently among the top five wealthiest people in the world list and truthfully, even the name of his company is something that I personally see as a successful Warren. The reality is he didn’t even start Berkshire Hathaway, but just like so many of his other companies, he’s built them up significantly into the behemoth that they are today.
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Warren Buffet’s rules for investing
“You should invest in a business that even a fool could run.”
Warren says because the reality of business is that there are so many changes in assets in business, in management, in the market, that there are essentially endless variables.
So his point is that if it’s a simple business model, that business model is more likely to be on track in the future. Simplicity scales and the reverse of that is actually also true that even an All-Star management company can’t fix a flawed business model.
Truthfully, if you’ve run a business, especially one at scale, and maybe not at the scale of Warren Buffet, a Berkshire hat where they have thousands and thousands of employees, but if you’ve seen businesses at scale, you know that even a plus All-Star employees are not All-Stars 100% of the time, and they have down periods and they make mistakes.
But if you have a business model that’s successful and simple, then the likelihood of the complications throwing your team off is massively reduced. That simple business model plus an All-Star team can allow your business to excel on a consistent basis.
“Never invest in something that you can’t understand. “
For example, Uncle Warren is famously negative about cryptocurrency. Not only does he refuse to invest in it, but he has also even gone so far as to compare it to rat poison. But the real question is why and Buffet answers this by saying, assets have to actually do something and to Warren, Cryptocurrency has zero utility, not Bitcoin, not Ethereum, nothing else. So to him, there’s no value in it.
His comparison is to things like farmland or apartments or a retail store where they actually provide a literal, tangible, good or service that you can measure, manage, and quantify. But let’s think about this quote one more time. Never invest in something that you cannot understand. Now if you are a proponent of cryptocurrency, bitcoin, et cetera, and you say, Look, there’s a ton of value there.
Well, you’ve actually answered why Warren’s not investing in it through his own quote, because the reality is he doesn’t understand it, so he’s not going to invest in it and if you look at his track record, it supports his quote even more, which is that he has actually missed big tech opportunities in the history of his investing career because he didn’t understand them, and he admits that freely.
But on the flip side, Warren has also missed huge tanks of the market, of the tech companies, of the.com bubble of the cryptocurrency, and NFT bubbles that have all popped. He’s missed all of those because he knew when he didn’t understand something and he didn’t push chips in on it. While he could be criticized for missing some upswings, he can be very much applauded for also missing the bursting bubbles.
This next quote from him is one of my absolute favorites, and it is a core tenant of Saint.
“Holding period is forever. “
This is actually how I started my investing career and where I’ve seen the most success in real estate, and from mentors that I immensely respect and the reality is the longer that you hold assets that are continuing to increase in value and are continuing to cash flow that multiplies significantly over a long period of time. Berkshire Hathaway, while guided by Buffet, has held stocks for decades.
His own strategy is that if an asset isn’t something you would want to hold for 10 years or more, then don’t even bother with it. Also, in the case of assets, buying and selling assets consistently can generate some massive tax consequences on the back end of that.
In addition, the reality is that emotions always come into play. So we’re moving all the dollars and cents. If you’re constantly zigging and zagging, just like you can’t trust your management, even the All-Stars to bat a thousand and be these amazing perfect employees and make perfect decisions, you as an investor aren’t gonna make perfect decisions.
So the zigging and zagging, the ups and downs, the back and forths in your investing decisions can add up significantly and bring your emotions into the fold in ways that you don’t want, and actually, another buffett quote comes to mind in this discussion. Warren regularly talks about how patient investors are the best investors and that a stock market is essentially a giant machine that takes money from the active investors and passes that along to the patient investors.
I’ve never forgotten that. It’s extremely interesting and an analogy that I use in real estate regularly.
“Opportunities come infrequently when it rains gold put out the bucket, not the thimble.“
While Warren is never in a rush to purchase assets, which can be seen by Berkshire Hathaway, huge amount of cash that they’ve been sitting on for years, the reality is that when Warren finds assets that he does like and he knows it’s the right fit, he makes huge moves and goes all in on that asset to make it happen.
Buffet is smart enough to know that big opportunities are rare. So if something is a good fit for you and you know that it’s a huge opportunity, put the bucket out to collect the gold, not the thimble. Go big. Don’t think small on one investment play. Then look at the example of Apple.
Right now around 40% of Berkshire Hathaway’s assets are invested in Apple alone. While that might seem like a dangerously high percentage to being one company, Warren truly believes in it and believes in the fundamentals. So it’s a confident decision for him. He saw the opportunity, evaluated the opportunity, knew it was a good one, and went for it and went all in. The next quote is, the price is what you pay, but the value is what you get. The important thing to learn here is to know the difference between the price and value of an asset.
Just because an asset’s price goes up does not mean the value that the asset produces goes up, that anything is better and that asset than it was before the price went up. In a weird way, this actually goes against human psychology. Typically, people assume that the value of something and the price of something is deeply connected, but oftentimes there is no correlation whatsoever. Smart investors don’t go along with the crowd and they make their own decisions, which means just because a price is rising doesn’t mean that you need to dog pile in with everybody else trying to make the same play.
Similarly, it doesn’t mean that you should liquidate or sell off your assets when things are going down. In fact, if you’ve seen some of my earlier videos, you know, I use a ton of strategy behind buying on the dip for many different asset classes.
The fundamentals are extremely important in that decision, but going against the herd, doing the opposite of what people are naturally doing in certain situations, you can find opportunities that they are missing.
“Beware of the investment opportunity that produces applause. The greatest moves are usually greeted by yawns. “
I love this so much because it’s such a contrarian view of the market, which Warren is famous for.
When one of the world’s richest people’s advice is to go against the crowd or to do things that are unconventional to the crowd, you have my attention and I wanna learn everything about that quote. Warren Buffet constantly invests in proven, stabilized demonstrated business models, and he also typically stays away from the risky current high performers that have a higher likelihood of failure overall.
If you analyze his goals, they’re relatively simple. He tries to invest in quality operations that are going to increase in value over time. The truth is that this simplicity is actually part of Warren’s brilliance.
President of Saint Investment Group
Nic is a two decade seasoned expert in investing and capital raising, specializing in Real Estate and debt markets. With Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications for investors.