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Lords of the markets: Warren Buffett

Let's say a little about one of the most famous personalities in the investment world. A man who is 91 years old and widely known as the "Oracle of Omaha, and who is CEO of Berkshire Hathaway, a half-trillion-dollar company, with a single share of stock trading at more than $ 410,000 per share in mid-2021 .

Warren Buffet is one of the best known and most influential investors today. He first founded the Buffet Partnership, which averaged the Dow Jones Industrial Average by 9.1% between 1957 and 1968. Warren Buffet disbanded the Buffet Partnership and began concentrating its investment on Berkshire Hathaway. The performance of the new company was huge, as the book value of the shares in 1965 was $ 19.46 and at the end of 2007 it was $ 78,008, which is a return percentage of 21.1 at the annual 43-year earnings. No other investor has surpassed Buffet in its profitability when investing in stocks. It still maintains a leading position among the richest people in the world. According to Forbes, Warren Buffet is currently the 6th richest man with a Net Worth of $ 96 billion.

Warren Buffet considered himself a disciple of Benjamin Graham, but unlike him, **Buffet also made his investment decisions based on a subjective feeling. **Buffet did not find Graham’s above-mentioned investment strategy profitable enough, so he adopted his own rules and principles of investing. Unlike Buffet, Graham was very careful because he experienced the financial crisis of 1929. The investor should approach the purchase of new shares as if he wanted to buy the whole company, or if he inherited the whole company, and it was the investor’s only asset. In such a case, it would be absolutely necessary to analyze the financial situation, get to know the competition and customers.

Buffet recommends choosing so-called inevitables among joint-stock companies . Such companies will be leaders in the industry throughout the investment. However, be aware that the current dominant position in the market does not guarantee this position forever. Companies like General Motors, Kodak or Sears were also invincible at the time. The great advantage of an individual investor is that he can wait for his great investment in the shares of an international company. Unlike portfolio managers, they do not have to invest regularly every month, or even every year.

Buffet has big reservations about active trading, where the investor often buys and sells shares . The hyperactive stock market discreetly robs investors and companies, and the only ones who profit from it are brokers. Billions of dollars are paid to NYSE and NASDAQ brokers every year. Unreasonable reasons for getting rid of shares are, for example, an increase in the discount rate by the Federal Reserve System by 25 basis points, receiving a hot tip for other shares, holding a share for a longer period or sufficient appreciation of the share. The reason for the sale should be a change in the company’s fundamentals or the finding of an error in the evaluation of the quality of management, or an estimate of the future economic results of 48 companies. Warren Buffet emphasizes that it is better to buy a high-quality company at a reasonable price than to buy an average company at a significantly low price.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Buffett, Warren

Vlastimil Bijota is a co-founder of investro.com, who has been dealing with financial markets and blockchain for more than seven years. He is an investor in several fintech compani...

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