Are you a fund manager? Do you manage a client’s investment portfolio? If not, then Warren Buffett is probably not the role model you should have. You might be wondering why the sage of Omaha is not the man you should take investment lessons from given that his pictures and quotes are everywhere.
Buffett is an investment manager
Warren Buffett has a lot to teach, but his lessons are far more apt for the fund managers managing the money of lakhs of investors like us. Whether it’s about choosing fundamentally good businesses or about choosing businesses one understands, his lessons are incredibly important for those whose job it is to choose companies to invest in.
Buffett’s lessons are business lessons
Many of the lessons Warren Buffett imparts about investing are about how to run a great business.
Berkshire manages many companies which were acquired under the watchful eye of Buffett and Charles Munger, his investment partner. They have made a success of erstwhile failing businesses and have made decisions which are the envy of other investment managers.
Most of us won’t be making such decisions where we really need to delve deep into a businesses balance sheet or the quality of its management. That’s a job for the mutual fund managers who manage our investments.
For investors such as you and I, the main goal is to ensure we become wealthy enough to lead a good life and take care of all our needs, financial and otherwise. Therefore, making sure that we save regularly and invest wisely for the different kinds of money needs, is what we need to focus on.
It, therefore, makes sense for our fund managers to follow Buffett’s style, but not so much for us. Does this however mean that we should ignore Buffett completely?
Not as an investor role model, but follow him as an individual
Those who have studied Warren Buffett’s life often remark on his simplicity of living as well as his frugality. He is known for his $ 3 breakfasts and for living in the same house for decades.
Leading a frugal and unassuming lifestyle is one of the key factors that decide whether someone retains the wealth they earn through their hard work.
The second is about getting rich slowly. Warren Buffett’s personal wealth has been accumulated over a period of 75+ years, starting at the age of eleven. And, 99% of his wealth was earned after the age of 50. Compounding of wealth requires time and patience.
No one teaches these two lessons with such effectiveness as Warren Buffett. And, as individuals, that’s what we all should take away from the second richest man in the world.