Warren Buffett is considered by investors a “demi-god.” The famed American businessman is the largest shareholder and CEO of Berkshire Hathaway and has a personal fortune estimated at $58 billion.
As if that were not enough, in 2013 he ranked fourth according to Forbes magazine’s ranking of the richest men in the world, just behind his compatriot Bill Gates, the Mexican Carlos Slim, and the Spanish Amancio Ortega.
All of this has made Warren Buffett one of the most successful and respected investors in the world and renowned for his teaching skills and his ability to express intelligent ideas in simple, witty terms. These are his “ten golden rules” to keep in mind :
1. Rules number one and number two: never lose money and always remember rule number one: Buffett is famous for having a conservative and defensive approach to the world of investments: before thinking about how to make money, his priority is to protect your capital .
2. Price is what you pay, value what you get: Price reactions in markets do not always adequately reflect changes in the value of companies. When the price falls below the firm ‘s value , a buying opportunity may present itself. Therefore, it is important to know how to differentiate both figures.
3. Be greedy when others are afraid and fearful when others are greedy: to take advantage of market fluctuations, he recommends always maintaining a critical and independent mindset in order to act against excess volatility, whether bullish or bearish .
4. It is much better to buy a wonderful company at a reasonable price than a reasonable one at a wonderful price: Buffett places more importance on the quality of the firm, even if it meant paying a price of entry that was not necessarily very low.
5. Wall Street is the only place people who ride Rolls Royces get advice from people who ride the subway: no one knows better than you what assets best fit your own risk tolerance and return targets .
6. Time is the friend of wonderful businesses and the enemy of mediocre ones: as time passes, quality companies with strong competitive advantages tend to increase their sales and profits.
7. I try to invest in companies that can be run by any idiot, because sooner or later some idiot is going to run them: Buffett pays a lot of attention to quality management when selecting assets, however, knows that it is always a transitory factor.
8. When we own extraordinary businesses with extraordinary management, our favorite investment period is forever: High-quality companies tend to increase in value over time, and Buffett selects those with lasting quality. For this reason, if things go as expected, many times no exit horizon is considered for the position.
9. After all, you only find out who’s been swimming naked when the tide goes out: the true test of the quality of a business comes in challenging times.
10. In the long run, the market news is going to be good. During the 20th century, the United States experienced two world wars and other military conflicts, the Great Depression, more than a dozen financial recessions and panics, oil shocks, epidemics, and the resignation of a disgraced president. However, the Dow Jones rose very strongly in that period.