You may have heard of him being referred to as "The Oracle of Omaha" or "The Greatest Investor of All Time" or possibly "The 3rd richest man on the planet." (April 2007) In any case, what you need to know is that Warren Buffett is one heck of a wealthy guy. And if you’ve never seen an interview or read about him you might think he lives a lavish lifestyle and might be slightly arrogant. Nothing could be further from the truth! He is a self-deprecating individual and pays himself a salary of $100,000 as CEO of Berkshire Hathaway Holding Inc. He is most famous for making the majority of his fortune through the stock market – whereas most billionaires and millionaires made their fortunes through founding a company. His net worth at time of writing is estimated at $52 billion – and he pledged the majority of that amount to the Bill and Melinda Gates Foundation in 2006.
His investment prowess has been oft-duplicated and well covered by the media. You can do some more research elsewhere, but last I saw his average annual rate of return was over 25% per year over 5 decades! He has essentially doubled the rate of return of the S&P500 (the main index used to measure the U.S. stock market). If you know about the power of compounding growth, then you know how fast his fortune grew over that time. He was doubling his net worth every 3 years!
There are many "Buffettisms" out there – one that comes to mind is that Mr. Buffett believed that if everyone were given one punch-card with 20 spots on it, and every time you made a decision to buy OR sell a stock would cost you a "punch" – then people would become better investors. His logic is that given a finite number of decisions to make, people would take more time to make informed choices. Indeed Mr. Buffett rarely purchases stocks and tends to hold on to them almost indefinitely. His name is often mentioned in the same sentence as the phrase "buy and hold".
But if there is only one piece of information that you take away from Mr. Buffett’s investing philosophy it should be that investors should look not at "buying stocks" but rather at "buying businesses". If you are willing to buy 50 shares in Company X, then you should be willing to buy the entire company outright. And if you were going to buy a small business in your local neighbourhood, you would probably perform a lot of research – including looking at the financial statements, analyzing demographic trends, the competition, etc. before buying the business. He contends that investors should be as diligent when picking investments for their stock portfolios…
I encourage you to Google Warren Buffett and find out more about this great individual and his investment philosophy – learning it is fairly simple, but practising his patience is quite the opposite! :)