Revealed: Warren Buffett’s Investment Philosophy

Revealed: Warren Buffett’s Investment Philosophy
Sharm El Sheikh Egypt by Julian Cohen. Why?

As one of the world’s richest men, the ‘Oracle of Omaha’ Warren Buffett is arguably the most successful investor of all time, so when he reveals his investing secret, it pays to listen

Warren Buffett Shares His Investment Secret

In May 1984, with 20 years of investment experience under his belt through his company Berkshire Hathaway, Warren Buffett gave a speech at the Columbia Business School.  Having already made millions of dollars, he surprised the assembled crowd by revealing his full investment philosophy.

Warren Buffett’s speech was subsequently turned into an essay entitled “The Superinvestors Of Graham-And-Doddsville”. 

Keep It Simple

How often have you heard that?

Warren Buffett’s philosophy IS simple. 

He says you shouldn’t think about buying a stock.  You should think about buying a business.

Watch the short video below for some simple examples as to how his philosophy works in practice.

The reference to Graham and Doddsville comes from Benjamin Graham, who taught Warren Buffett at Columbia, and David Dodd, who along with Benjamin Graham detailed everything about security analysis.

In Warren Buffett’s essay, he analyses a group of investors who consistently outperformed the S&P500 for years.

He writes: “In this group of successful investors that I want to consider, there has been a common intellectual patriarch, Ben Graham.  They have gone into different places and bought and sold different stock and companies, yet they have a combined record that simply can’t be explained by random chance.”

Warren Buffett explains there are investors who aren’t interested in the analytics of the stock.  They are simply businessmen buying pieces of businesses, and not traders buying stocks.

Warren Buffett’s Strategy Has Worked Brilliantly

Class A shares of Warren Buffett’s company Berkshire Hathaway broke through the $200,000 per share for the first time in August 2014.  Six months later in February 2015, they were 10% higher.

warren buffett

Had you invested $1,000 when Warren Buffett revealed his philosophy in 1984, 30 years later, your investment would now be worth just over $155,300.  That’s a staggering compound interest return of 18.3% per year.

In Warren Buffett’s essay, he concludes by suggesting that some may wonder why he’s revealing his ‘trade secret’.  Answering his own question, he indicates that what he’s doing isn’t new, having been around for 50 years.

Famous for his quotes and observations, he writes: “There seems to be some perverse human characteristic that likes to make easy things difficult.”

Sometimes, indeed often, simple can be best!

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