Warren Buffett ranks among the most successful investors of all time. Between 1965 and 2017 Berkshire Hathaway delivered an average annual return of 20.9%, while the S&P 500 managed 9.9%. One thousand dollars invested in 1965 was worth more than 18 million dollars by 2017. His strategy is not a secret, though. He has been sharing it publicly for decades.
1. Invest only in what you understand
Buffett believes in the “circle of competence”: invest only in industries and companies you genuinely understand. He avoided technology for years, until he came to see Apple as a consumer business with a strong brand and loyal customers.
2. Buy companies below their true worth
As a student of Benjamin Graham he practises value investing: look for companies whose market price sits below their intrinsic value. That gap is the margin of safety.
3. Invest for the long run, ideally forever
Buffett does not trade day to day. He still holds the Coca-Cola stake he bought in the late 1980s, and it has paid Berkshire billions in dividends. Holding for the long run puts the power of compounding to work.
4. Never overpay, protect your capital
“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.” Even for outstanding companies he pays a fair or undervalued price, and in an investment mania he simply waits.
5. Be greedy when others are fearful
“Be fearful when others are greedy and greedy when others are fearful.” Berkshire stepped into the market during the 2008 crisis and again in the 2020 pandemic, precisely when everyone else was waiting.
The rules are simple, but following them takes discipline, patience and the courage to go against the crowd. A great investor is not the one who predicts the future, but the one who prepares for it with judgement, data and a cool head.
