Secrets of the Great Investors Like Warren Buffet

Great investors surely have investing secrets that they use to build wealth, but they are open secrets. Anyone can find out what the greats do and copy them to have success in wealth creation. And many of the so-called secrets are simply common sense principles.

For instance, investing in a company with consistent earnings is the sensible thing to do and one that has helped Warren Buffet earn his millions. Taking care to invest in old and well-established companies is another. Many investors run into trouble by jumping on the bandwagon of some new company that sparkles for a while then quickly dies out leaving a pile of rubble rather than money.

Another common sense principle that is applied to both real estate and shares by the great investors is to never pay too much for an investment. Generally the more you pay, the less you get back as many real estate investors have found out to their cost. Warren Buffet also believes in concentration rather than diversification. When he buys a company he typically buys around 80%, and keeps it.

Another secret investment principle Buffet favours that has helped him with his wealth creation is to buy companies with experienced managers and keep them on to do what they do best – run the company. Buffet rarely interferes with the running of the companies he buys. He simply compliments the managers on the job they are doing. Buffet’s talent is to see where good investments are and buy them, not run the company.

Checking out the management philosophy of a successful business is another secret. Knowing that the manager cares more about the company than the price it brings has worked for Buffet. He studies the character of the company managers before making a decision to buy the company.

Finding a company whose manager is frugal and cares about costs is an important secret of great investors. They know that one way to build wealth is to spend less and managers who run a consistently tight ship are the successful ones.

While some investors feel that a younger manager will enhance a company’s ability to move with the times and make more money, Buffet prefers to retain the successful manager well past the legal retiring age. He considers that experience is the key word when it comes to managers.

Setting high standards and keeping them may seem unnecessary to many, but it has seen many great investors build wealth where others fail. We would do well to take on board some of these secrets for ourselves.

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4 Responses

  1. Carole Gold says:

    Thanks. It never hurts to be reminded of what’s time-honored and proven common-sense advice. And Warren Buffet is proof!

  2. ALways great to hear another perspective on Warren.
    How often common sense is not that common.
    I guess that Warren always follows the addage that if you don’t understand something then don’t get into it. Proved worth millions to him in the tech wreck.
    Will be interesting to see the outcome of his latest venture into Goldman Sachs!!

  3. I agree with you. The Great Investor, like Warren Buffett build his wealth by:
    -investing on the business that is simple and understandable for him. The business that make a consistent earnings all the time. The business that we can predict its cash flow. The business that we can predict, it will run well for about 10 year later. These are characteristics that you said as a common sense secret.
    -no buy to much on his investment. Its mean that The Great Investor, like Warren Buffett cares about price of investment. He only buy a company that has big margin of safety. Its mean that the instrinsic value of the business is more higher than the price. We usualy called The Great Investor, like Warren Buffett is a value investor.

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