How To Achieve A High Investment Return: Warren Buffett

When Warren was 25 years old he started his first investing firm Buffett Partnership with an initial capital of $105,000. The Buffett partnership made a 29.5% annual return from 1957 to 1969, almost 12 years. Buffett used very simple investing approaches to achieve this return.

“You don’t need to be a rocket scientist. Investing is not a game where the guy with a 160 IQ beats the guy with a 130 IQ. Rationality is essential.”

Warren Buffett

When it comes to investing Buffett is always rational. He didn’t invest based on the emotions. He used very simple investing strategies to achieve these high returns. Warren Buffett focused on individual business performance, not the overall market or economic performance.

This is a rule that is most relevant to today’s market conditions. We are in a 15-year bull market run & stock prices have increased to their all-time highs. People are investing their money heavily in stocks, everyone is talking about stocks, and headlines are saying ‘I became a millionaire by investing in stocks.’ Everyone is hurry to be rich by investing.

But when it comes to Buffett his approach is different from the crowd. Over the past few years, he didn’t invest his money heavily in any stocks or businesses. Because he didn’t see any great opportunity to put his firm’s money. Berkshire Hathaway currently sits with $167.64 billion in cash.

“Be fearful when others are greedy, be greedy when others are fearful.”

Warren Buffett

In the current market situation, every stock has been rising & everyone is making money. This leads everyone to become greedy. They are overconfident. This leads to a rise in stock prices because everyone wants to invest their savings, and income in stocks.

As intelligent investors, these are times we need to be fearful. We must be careful with our investments. We need to prepare ourselves when it comes to a market crash & at the moment we need to buy heavily.

We all have heard about compound interest & we know that Buffett made his fortune by using this compound interest. He became the world’s richest person just by using this approach. What compound interest does is when you get dividends or capital gains & you let that compound on itself & grow like a snowball you can make a lot of money.

But if you are constantly buying & selling stocks you are not letting compound interest do its thing & you will miss out on a lot of returns. It is all about time in the market not timing the market. The key with investing is when you buy a stock you should prepare to hold it forever.

Warren Buffett has owned Coca-Cola, Wells Fargo, and American Express for over 25 years.

“If the job has been correctly done when a common stock is purchased the time to sell is almost never.”

Phill Fisher

When it comes to buying businesses or stocks investors are biased with the stock price. Investors are not interested in buying stocks for higher prices. They always looking for cheap prices. This is a strategy used by Buffett early in his career. As a student of Ben Graham Buffett used to buy businesses under their intrinsic value & when each business reached its intrinsic value he used to sell the stock position.

However, after meeting with Charlie Munger, Buffett’s strategy turned into buying great businesses at fair prices. After building Berkshire Hathaway Buffett focused on buying great companies with great moats, like Coca-Cola, Apple, American Express, Moody’s, etc.

“Forget what you know about buying fair businesses at wonderful prices, instead buy wonderful businesses at fair prices.”

Charlie Munger