"An idiot with a plan can beat a genius without a plan." - Warren Buffett
I'm a huge fan of Warren Buffett.
Why, because at the age of 93 years old, he is still working, eating McDonalds, and drinking Coca-Cola with a total net worth of 120 billion USD.
Still living in the house, he bought in the 1950s and driving an equally modest car, the Oracle of Omaha prefers to keep and grow his money rather than take it out of the bank.
We all should praise him for his honesty and wisdom which he accumulated over the years.
I don't want to introduce him again here for which the whole Internet is filled with articles. Loz...
What I am going to tell you here is about his long-life wisdom and mental nuggets.
Top 6 Warren Buffet Mental Nuggets
1. Your greatest asset is you
In a shareholder meeting in 2002, Warren Buffet asked a question to the audience:
"Imagine you offered a 17-year-old free car, any car you wanted. But the caveat is that it had to last a lifetime."
Definitely, whoever receives the car would likely read the owner’s manual dozens of times and change the oil twice as often as recommended.
This fundamental principle applies to all of us.
💡We all have one mind and one body.
You can't expect to be able to repair it by the age of 60.
2. Learn Accounting
To become a world-class investor.
Warren Buffett emphasizes learn accounting by reading as many annual reports as possible.
If you understand it, you will definitely understand investing.
🔎If accounting in financial reports does not make sense, it’s because management is hiding something.
3. How to Hedge Inflation
In 2005 letter he warned dollar is declining same as Mr. Rich Dad Poor Dad does these days.
Buffett stated that while gold is frequently mentioned as the finest inflation hedge, practically any physical asset functions as a decent hedge.
Buffett prefers physical assets that produce something, like agricultural land and oil rigs.
👉Gold could act as a hedge, but in the long term, it’s not producing any economic value.
👉Ideal inflation hedge is only a product or brand where you can raise prices to keep up with inflation.
4. The Root of Evil
Buffett served on the Salomon Brothers board; there he discovered a financial lesson:
Greed is not the root of all evil. Envy is.
If an employee received a $1 million bonus, he would be happy until he heard that a colleague received a $1.1 million bonus.
He would then be miserable.
This applies to all of us. Because Greed is our Primal Desire.
5. On Leverage
Buffett predicted an interesting thing in 2007:
Derivatives would create a disaster due to high leverage.
The lesson is not to time a downfall. The lesson is to keep your own leverage manageable.
👉 Even if you have 10 successful years, your overall return will be 0% if you lose everything in the 11th year.
6. Returns vs. Size.
Buffett cautioned investors in 2008 to not compare previous results with future returns.
Berkshire rose to become the 11th most valuable US firm, so it would consider acquisitions of $50 billion to make a huge difference.
As per him, there are more companies in the $20 million range to value better as compared to the $50 billion-plus range.
If you’re good at managing money, you can surpass 80% IRR returns if you manage $50 million but it's very hard to do while managing $1 billion because of the size and complexity.
We are at the end, and we do not know yet what is the company name.
It is Apple.
The most salient lesson from Buffett is the value of consistency and integrity.
Through all his years, he has remained true to his principles and philosophy, offering the world not just investment advice, but life lessons.
Thanks for reading and before you go…