Warren Buffett on Investment Philosophy

Warren Buffett on Investment Philosophy

Warren Buffett Has His Own Investment Principles


Warren Buffett, one of the most successful investor in the world, although he does not disclose his investment strategies, especially on behalf of the Berkshire Hathaway, he does his own investments in the stock market, from which we can learn how to invest from him.

It is undeniable that he is the most respected man in the field of investment in the world, but it is not easy for us to learn how to invest like him in the changeable stock market. In this article, rather than introduce how he is so successful in making his own investments, I would like to share his investment principles to you.

Warren Buffett Investment Index


Be a Patient and Persistent Investor


As an investor, Warren Buffett knows why, when and where he should invest, which is totally unlike other investors who just make their investments without considering their margin of safety. Sometimes it seems that it is safe, while in fact, it is risky for investors to make their investments.

Therefore, if you want to make investments, Buffett always warn you that you should be patient and persistent in finding your best investment targets. Once you find it, purchase its shares as many as possible and keep them in a long term and sell them at a rather high price.

Berkshire Hathaway

Be a Careful Investor


If you are a mindless people, you would not make investments in the stock market. Those successful investors are those who are prepared person, otherwise, they will not invest their money. Whatever principles of investment you can understand, if you are careless, you are doomed to be failed. If so, you’d better distance yourself from the stock market.

Benjamin Graham: Warren Buffett’s Mentor of Value Investment


When Warren Buffett was an undergraduate student at Columbia University, he learned the value investment from his mentor Benjamin Graham, who helped him to construct his own principles of investment.


Following Benjamin Graham, Buffett formed his own investment philosophy:

Warren Buffett's Investment Principles

 1. When you make investment, please know the company well and be sure the company is good managed and has great potential in the future. Here are several factors to test a good management:
•    Share buybacks
•    Good use of retained earnings
•    Sticking to what you know

2. If you want to choose a stock, be sure the company could demonstrate its earning capacity, which can be continued. Here are some factors you should consider for its earning capacity:
•    Company growth
•    Dealing with inflation
•    Capital expenditure
•    Look through earnings
•    Brand names

3. If a company does not have consistently high returns, you can ignore it. In order to know whether a company has high returns, Warren Buffett would look at both:
•    Returns on equity
•    Returns on capital

4. When it comes to the debt, Warren Buffett always considers those companies which have low debt, just in case the safety of investment.

5. The businesses of the company should be simple and the investor could understand it.


6. If the company can satisfy you with all the factors above, you may consider buy its shares. However, before purchasing its stock shares, you’d better consider its price. Do not make purchase at a high price. Otherwise, you are going to lose your money. Remember, you should always remember the margin of safety and purchase your stock shares at a rather price. Before purchasing, you should consider these factors:
•    Price/earnings ratios
•    Earnings and Dividend yields
•    Book value
•    Comparative rates of return

7. Investors need to take a long term approach rather than a short term investment.