To follow the rules means to succeed (The White Mercury, the Black Jupiter)
During his whole life Warren Buffett was focused on investing in stocks. Forbs magazine ranks him second in the world list of billionaires. He is anticipated only by Bill Gates regarding the size of the fortune. Unlike many, Buffett bought shares not using some super market research and analysis, but following ten quite simple and reasonable rules, which he formulated basing on his own and on the experience of other people. Buffett's investment concept harmoniously joins the most important and effective things he was able to learn from his teachers, outstanding investors: Benjamin Graham, Philip Fisher, John Baer Williams and Charlie Munger. Following his own rules, Buffett was able to reach new heights in the financial world. Numerous businessmen and financiers, inspired by his example, are carefully studying these rules for decades. They even successfully apply them in practice, but nobody has managed to outrun or at least repeat Buffett’s achievement so far.
Buffett says, "Really rich and successful people manically learn and absorb knowledge. The purpose of the day is to go to bed at night smarter than you got up in the morning. Learn from those around you. Be a sponge. Any event is a lesson. Continue learning".
"Investing is to invest money today and to get more money tomorrow..." (The White Moon)
This is the first Buffett´s rule. He has always lived in a very unpretending way: instead of living in expensive houses and eat in restaurants he invested in stocks every spare penny. He increased the sum from $ 100,000 to 200,000% during 35 years. He bought shoes and suits either in the sales or in affordable shops for the middle class. The protagonist of his favorite cartoon (Disney "DuckTales"), millionaire Scrooge McDuck, likes to repeat the words, the authorship of which is credited to Warren Buffett: "A dollar saved is a dollar earned".
Buffett’s unprecedented generosity appears exclusively in matters of charity. In June 2010, Buffett announced the donation of more than 50% of his fortune to five charity funds. Most of the funds will be administered by the Bill and Melinda Gates Foundation. This was the most generous act of charity in human history. In addition, once a year, Buffett breakfasts with a person who won the right at the auction. Each year, the cost of the breakfast increases, and, having started from $ 600,000 it reached $ 3.5 million in 2012. The collected funds are also donated to the charity. According to the will, 99% of his fortune will become the property of various charity funds.
"Serving of the muses does not tolerate the fuss..." (The Black Sun, the White Moon)
This is Buffett’s tenth rule. "I buy stocks, and I do not care what happens to the market the next day, Buffett says. - However, it is not difficult to predict what will happen to the market in the long run". Buffett does not speculate in shares. He, as the analysts say, "firmly invests" them. The phrase: "The best time to sell stocks is never" belongs to him.
When he was 11 years old, Warren tried his hand at the stock exchange fro the first time. Together with his sister he bought three shares of Cities Service Preferred at $ 38.25 per share. At first, the price dropped to $ 27, then rose to $ 40, and Buffett sold them to make a profit of $ 5 dollars. It is curious that in a few days, the stock price rose to $ 202 dollars. This first experience taught Buffett that the investor must be patient and do not panic if prices fall, do not sell for short-term gain and to be sure of success. The basis of his business activity is long-term investment in stable growing projects. He is very conservative. His tastes almost did not change over the past 20 years. He uses Gillette razors (he earned nearly $ 5 billion on its shares), prefers Coca-Cola (it brought $ 10 billion), pays by American Express credit card (gave $ 4 billion), likes to read the Washington Post (it cost him 11 million, but he earned a billion on it).
Caution (The Black Saturn, the White Mars)
One should listen to the estimates and recommendations of analysts, as well as to the weather forecast, but one should not trust them 100%. That is why it is better to invest in the field, which is better in your personal opinion. Warren Buffett considers it to be true and gives his rule number 3 as evidence: "Do not invest in areas you do not understand..."
He declares the thesis that it is possible to run big business without resorting to risky tricks. He makes his way in the world of business basing on his own vision of economic mechanisms and monetary levers, thus he prefers to run it in simple and clear areas and does not like the world of high technology. The investor has always been stressing that the high-tech industry is extremely difficult to predict, and therefore he has always avoided making investments in this area. He stresses that it is needed to "see" the whole mechanism of business from the inside and to feel the pulse of cash flows, to know how reliable the system is.
"Remember about mistakes of other people", Buffett likes to say. The first 7 "pieces of art" in his office are not paintings but framed newspaper clippings about the largest financial failures which have occurred over the last century. Warren refuses to take steps in business which would threaten or have even the slightest danger or lead to financial disaster. The more you learn about the "rake", other people step on, the more chances you have to come by them.
Business before pleasure (The Black Venus, the Black Saturn)
Although women have been an important part in Warren’s life, they have never come first for him. There were two women who filled the void and took care of Buffet. The first was his wife, Susie. Buffett worked constantly, and Susie knew that the most important thing for him was to be loved and to be never criticized. She hoped that one day he would earn enough money to stop working, and finally, pay attention to the family, although he was 6 years old when decided he would never stop. After the children grew up and began to live their own lives, Susie left. The couple lived apart for 27 years, often talking on the phone. For a while, Susie thought she should return, but finally, she asked her friend Astrid Menks to check how her husband was. Eventually, Astrid moved to Buffett. "Susie made me integral and Astrid kept me this way", he says.
"The most important thing is the history of the company..." (The White (Grey) Mars, the Black Jupiter)
This phrase represents Buffett’s rule 9. From the point of view of the master of finance, investors make the same mistake too often, trying to evaluate the situation judging on a very short past, missing great opportunities. It is necessary to see the entire history of the company, rather than short-term events. Warren Buffett chooses stock basing on the financial and productive data of the issuing company and uses the calculations in order not to be trapped then. He buys not just the shares, but successful business behind these security papers. This position of the prominent investor is also supported by one of his rules: "There are share-winners on the market, and one needs to find them..." In contrast to his teacher Benjamin Graham, Buffett studies not only the balance of the enterprises, but also their corporate structure and the biographies of top managers. He invests in the shares of well managed companies only.
Warren Buffett’s quotes:
"Do not expect that people will change". (The Black Sun)
"Lose money of the firm and I will understand; lose a shred of reputation for the firm and I will be ruthless". (The White Moon, the Black Venus)
"Be the only offer on the market". (The Black Venus)
"Great things are built as a result of the combination of time and consistency towards a cause you deeply believe in". (The White Mars)
"You don't need to be able to do that many things right to succeed. Do a few things really well". (The White Mars, the Black Sun)