Forbes 2013 Investment Guide—
Warren Buffett, CEO Berkshire Hathaway Berkshire Hathaway
Do you have enough cash yet? Warren Buffett, the third-richest person in the world, says that he had all the money he needed by age 25, when his net worth reached $200,000.
“Money has given me the independence to do what I love daily. Beyond that it has no real utility for me but enormous utility for others. That is why I’m giving it away,” says Buffett, 82.
Indeed, Warren Buffett has joined pal Bill Gates and 112 other billionaires in The Giving Pledge, a rarefied group that has committed to giving the bulk of their fortunes to charity. So far Buffett has dispensed with more than $17 billion.
When asked what the best money advice he ever got was, it’s no surprise that Buffett turned to his holy bible, The Intelligent Investor, written in 1949 by value god Benjamin Graham.
“Chapters 8 and 20 have been the bedrock of my investing activities for more than 60 years,” he says. “I suggest that all investors read those chapters and reread them every time the market has been especially strong or weak.”
Here’s the Twitter-generation version of what is contained in those two chapters:
Don’t let the mood swings of Mr. Market coax you into speculating, selling in panic or trying to time the market.
Only after careful analysis of a company’s ongoing business and its prospects for future earnings should you consider buying it and then only if its current price incorporates a significant “margin of safety.”
It boils down to avoiding losses by owning only stocks selling well below your calculation of their fair or intrinsic value. After that, the key is to keep your emotions in check and be patient.