“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” If you can grasp this simple advice from Warren Buffett, you should do well as an investor. Sure, there are other investment strategies out there, but Buffett’s approach is both easy to follow and demonstrably successful over a period of more than 50 years. Why try anything else?

For anyone who is not an accountant, annual reports of companies are dull things indeed. Once you know how much money a company has made (and you don’t need the annual report for that), there isn’t anything much that’s worth reading. However, there is one company in the world whose annual report is eagerly awaited for the interesting reading material that it has and that’s the American company Berkshire Hathaway.

The reason? The annual letter to shareholders that is written by the great investor (and Berkshire Hathaway’s Chairman and CEO), Warren Buffett. Buffett is perhaps one of the most respected businessmen of the world. His ideas on business and investing are full of a simple wisdom that would have sounded naive and unworldly had it not been for Buffett’s fantastic track record. Buffett’s 2007 letter, which was released on February 29, is as interesting to read as any of the earlier ones.

The central tenet of Buffett’s investment philosophy is that one should not invest in anything that one does not understand and that one should be unremittingly focused on long-term value. Buffett is also deeply skeptical of financial engineering and ‘innovative’ financial instruments. In today’s situation, when volatility rules and people are investing day-to-day and sometimes hour-to-hour, it’s worthwhile to take a cool look at what people like Warren Buffett have achieved and how they’ve achieved it.

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