How Warren Buffett became rich? His fascination for money-management made him so rich. Yes, people like Buffett are not fascinated with money alone; instead they like the process of good money management.
Buffett does not practice investment as a mere number game. He uses pure business logic to take investment decisions.
Common men often takes haphazard investing decisions. Warren Buffett’s investment decisions are logical and consistent.
Most of the time, common men are not aware of their bad investment decisions. They keep making mistakes without being aware of it. Warren Buffett became rich by contradicting this theory. He takes pride in taking maximum right investment decisions.
Warren Buffett became rich by taking right investment decisions. Buffett knows clearly which investment decisions are good and which are bad.
What makes Warren Buffett so sensitive to good and bad decisions? Buffett’s awareness about companies fundamentals enables him to take right decisions.
How Buffett increases his awareness? He reads companies financial reports like novels.
While investing in stocks, it is as important to read financial statements of companies. It will not be wrong to say that Warren Buffett became rich by reading financial reports of companies. How?
Reading financial reports helps to control ones irrationality. Common men often take irrational investment decisions. Irrational investment decisions in stocks can be contained by being more aware about the companies finances.
Two personal emotions that often triggers bad investing decisions are fear and greed. Warren Buffett taken complete care to stay aloof of these negative emotions.
Its only human to fall prey to fear and greed. But what will prevent one from falling prey to them is knowledge.
Stock investors awareness about companies intrinsic value helps him to fight greed and fear.
If a company is doing good business, its intrinsic value will not reduce because market is fearing losses. If a company is doing bad business, its intrinsic value will not improve because market is greedy and bullish about it.
What can improve or damage companies intrinsic value is their own fundamentals. Warren Buffett remains extremely aware of intrinsic value of his favorite company.
Warren Buffett’s practice a very simple investing rule. He would buy only those stocks which are trading at discount to its intrinsic value.
Fear and greed often influences people to buy stocks at overvalued price levels.
It will not be wrong to say that Warren Buffett became rich because of the way he preaches intrinsic value rule.
How Buffett preach intrinsic value?
Warren Buffett is aware that not all investors thinks rationally while investing. Majority investors take irrational investment decisions. Trained investors like Buffett take advantage of others irrationality.
Due to irrationality, market price of good stocks falls below its intrinsic value. Buffett buys such stocks. This is called buying stocks at discounted price.
When irrationality ends, market price bounce back to its true value ensuring maximum yield for its investors.
Intrinsic value also helps investors in identifying overvalued stocks.
Warren Buffett never focus on stock price movements. Instead his main focus is always to buy fundamentally strong companies at bargain price.
Investors mind-set is very different from speculators. Warren Buffett’s temperament and skills as investor has made him really rich.
Warren Buffett became rich as he is Calm
Warren Buffett keeps calm even when market is very volatile. His awareness about business fundamentals keeps him calm.
Buffett is well aware that market price of stocks keeps fluctuating. At times price fluctuates dramatically due to unreasonable behaviour of speculators.
He stays calm even in extremely volatile market as he knows soon situation will change. When price falls, Buffett stays assured that the price will bounce back if its fundamentals are strong.
For Buffett, important is to concentrate on stock fundamentals instead of panicking.
Warren Buffett can see the worth of his investment portfolio shrink to half. Still he will not get panik attacks.
What keeps Warren Buffett unnerved?
His belief in his stock fundamentals keeps him calm. Buffett always buys stocks of fundamentally super-strong companies.
No matter how low the price of these companies fall, it will always bounce back.
In fact, Warren Buffett gets into the buying mood, when price falls. By being calm in bad market, Buffett actually profits too much.
He never invests where everyone else is investing.
Common men will never buy that stock whose market price is falling drastically. But Warren Buffett will buy it if it shows strong fundamentals.
Warren Buffett became rich as he is Patient
Warren Buffett neither gets depressed nor gets too excited.
For Buffett, waiting for the right opportunity is the key. Warren Buffett’s ability to say NO to investments is phenomenal.
As an investor Buffett says very less YES’s.
Warren Buffett is a avid follower of Intrinsic Value rule. Until stocks price reflects margin of safety he will patiently.
Majority of investors fail miserably because they invest compulsively. But Buffett never invests in compulsion. He will not buys stocks till all conditions are in his favour.
He also makes compromise while investing. But his compromises are also well calculated.
Buffett believes that buying a outstanding company at mediocre price is better that buying a mediocre company at an outstanding price.
In order to catch hold of outstanding companies, investors needs to be patient.
Fewer ‘outstanding decisions’ can make more money than many ‘mediocre decisions’.
Patience of Warren Buffett has made him so rich. He can wait for years for the right buying opportunity.
Warren Buffett became rich as he is Rational
The clarity and simplicity of his thoughts has made Warren Buffett so rich.
Common men are either too pessimistic or over-enthusiastic. Buffett prevents himself from dangling between these extremes.
His rational investing practice provides him the necessary balance.
While doing business, if one can follow simple logic’s he/she can become really rich.
Buffett is successful in investing because of the way he keep himself away from market when everyone else is investing.
When majority is thinking about buying stocks he is actually putting his money in bank deposits.
Common men gets attracted to market when index is moving up. Absolutely opposite conditions attracts Buffett towards stock market.
Warren Buffett’s investing philosophy is not only rational but is also simple.
He buys stocks of companies which are run by great managers. He buys stocks of companies that sell high quality products whose demand only grows with time.
In order to always stay rational, Buffett keeps himself well informed.
He spends times reading companies financial reports. He checks 10 years financial statements of companies before buying its stocks.
By analyzing companies financial reports, Buffett can immaculately estimate its intrinsic value.
This ability to rationalize intrinsic value of stocks has helped Warren Buffett become rich.
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