Tuesday, November 22, 2011

Only deal in things you can understand: Warren Buffett
 "Invest, don't speculate."
 "Only deal in things you can understand."
"Be greedy when others are fearful and fearful when others are greedy."
Name: Warren Buffett 

Age: 81

Title: CEO

Residence: Omaha, NE

Country of citizenship: United States

Education: MS, Columbia University; BA/BS, University of Nebraska Lincoln

Marital Status: Widowed, 

Children: 3
— These are three of the maxims of Warren Buffett—the modern Midas who, with a net worth in the tens of billions of dollars, is arguably the world's greatest moneymaker. How has he achieved such success? 
Warren Buffett  was born in 1930 in Omaha, Nebraska, the son of a stockbroker and Congressman, and has become probably the world's most successful investor. warren Buffett's determination and creativity have made him who he is now: chairman of a long-term investment company with more than $2 billion in holdings.
As a boy, irrespective of his family background, he delivered newspapers to make extra money and this probably sparked his interest in the media where he has made several successful investments including the Washington Post Company, a stock that has made him a lot of money and which he vows never to sell.
Buffett's interest in finance was clear extremely early in life. He started playing the stock market with one of his sisters when he was 11. At 12, he was betting on horses, and by high school he had started a business (pinball machines) with a friend, which earned him $50 a week. Not only did he own a business by graduation, but he also had bought himself 40 acres of Nebraska farmland with his profit.

Buffett truly caught the investment bug as a senior at the University of Nebraska, when he read Benjamin Graham's The Intelligent Investor. The bible of the so-called value investors, Graham's book advised investors to hunt for stocks that trade far below their actual value, "cigar butts" -- companies the stock market had discarded but that still had a few "puffs" of value left in them.

The challenge appealed to Buffett's mathematical skills. After graduating, Buffett was rejected from Harvard Business School, so he moved to New York to study with Graham at Columbia University. After earning a master's in economics, he began working for his mentor.

Feeling constrained by Graham's strict philosophy, Buffett wondered if it made more sense to buy good businesses at a fair price than dying businesses on-the-cheap. In 1957 he returned to Omaha and started his first investment partnership. A group of Omaha investors handed him $25,000 each. Buffett put in $100 of his own, appointed himself general partner and began buying stocks. His goal: beat the Dow Jones Industrial Average by an average of 10 percent a year. When the partnership dissolved in 1969, Buffett's investments had ballooned at a compound rate of 29.5 percent, compared to just 7.4 percent for the Dow.
Buffett, after several years, decided to wind up the partnership, returning the lucky investors their capital and their share of the profits, and bought an interest in Berkshire Hathaway, a textile company, giving his original investors the the chance to invest. The smart ones did so.
Buffett's early days at Berkshire Hathaway were not great. The company was in an industry facing real challenges from exports and high manufacturing costs. Warren Buffett had not, however, forgotten what he had learned under Graham, and arranged for the company to buy out two Nebraska insurance companies.
This was the start of Buffett's interest in insurance and the rise to financial fame of both himself and Berkshire Hathaway. The insurance game is a hard one but under Buffett, the company has become, not only a successful share investor, but a leading provider of insurance.

Some Very interesting aspects of  Warren Buffett

  • He bought his first share at age 11 and he now regrets that he started too late!
  • He bought a small farm at age 14 with savings from delivering newspapers.
  • He still lives in the same small 3-bedroom house in mid-town Omaha, that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall or a fence.
  • He drives his own car everywhere and does not have a driver or security people around him.
  • He never travels by private jet, although he owns the world's largest private jet company.
  • His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis. He has given his CEO's only two rules:
  • Rule number 1: do not lose any of your shareholder's money.
  • Rule number 2: do not forget rule number 1.
  • He does not socialize with the high society crowd. His past time after he gets home is to make himself some pop corn and watch television.
  • Bill Gates, the world's richest man met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet. So he had scheduled his meeting only for half hour. But when Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.
  • Warren Buffet does not carry a cell phone, nor has a computer on his desk.
  • His advice to young people: "Stay away from credit cards and invest in yourself and remember:
  • Money doesn't create man but it is the man who created money.
  • Live your life as simple as you are.
  • Don't do what others say, just listen to them, but do what you feel good.
  • Don't go on brand name; just wear those things in which you feel comfortable.
  • Don't waste your money on unnecessary things; just spend on them who really in need rather.
  • After all it's your life then why give chance to others to rule our life."

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