The 4 Pillars Of Warren Buffett When Investing

You can trust him, Warren Buffett knows what he’s talking about.

Sylvain Saurel
Nov 11, 2019 · 4 min read
Warren Buffett

Warren Buffett is now known to all as one of the greatest investors of all time. He has had such consistent success over the past 60 years that his success cannot be attributed to any chance. Warren Buffett has succeeded in building a true financial empire by always remaining true to his values and in particular investing in a way that takes into account the intrinsic value of companies. In this sense, he has always followed the doctrine of the economist Benjamin Graham, which he has always held in high esteem.

Its success has earned him the nickname of “Oracle of Omaha”. Most investors are fascinated by his phenomenal success and are therefore looking to get the most out of Warren Buffett while he is here on Earth. While Warren Buffett has distilled a significant number of advice throughout his career, I have chosen to focus on his 4 investment pillars in order to present them to you in detail.


1. Invest In Yourself

Warren Buffett’s first investment advice is always the same. Thus, Warren Buffett consistently argues that the best investment you can make in life is simply to invest in yourself.

You must spend your life trying to learn new things and deepen your knowledge, whether through reading or training.

Warren Buffett always says he spends most of his days reading. He reads articles in the specialized economic press or books on various and varied subjects.

Warren Buffett is often surprised that too few investors ask him what his favorite books are. Indeed, he considers that the knowledge he has been able to acquire with his favorite books has enabled him to experience the investment success that everyone now envies him.


2. Cash Is Bad Investment

Keeping your money in savings account is a very bad investment for Warren Buffett. If you have any interest in the world of personal finance, you have probably already become aware of this fact.

Nevertheless, I will quickly explain why. When you let your money sleep on savings account where rates are generally less than 1%, you earn almost nothing. Of course, you tell yourself that acting like a reasonable person is safer and that at least if you don’t make big money, you don’t lose any of your capital.

Well, that’s not true! Indeed, given that price inflation, which in most cases is much higher than savings rates, your money sleeping on savings account will be worth much less in 5 years. So imagine in 10 or 20 years…

Warren Buffett therefore advises never to leave more than the bare minimum in cash on your savings account.

The rest must be invested in a diversified way to take full advantage of the magic of compound interest.

If you are wondering what the bare essentials are, I think having 6 months’ salary in advance on your savings account is more than enough. This gives you the financial flexibility you may need if you lose your job, for example.


3. Invest In Productive Assets

Like Robert Kiyosaki, whose best-selling book “Rich Dad Poor Dad” praises investing in assets rather than liabilities, Warren Buffett has always recommended investing in productive assets. Thus, despite the fact that his wealth is just over $85 billion, Warren Buffett has always maintained the same lifestyle in order to minimize the liabilities in his life.

Warren Buffett still lives in the same house he bought in 1958 for only $31,500. He has lived frugally since time immemorial and drives in a car that is modest in comparison to his fortune.

Warren Buffett likes to rehearse:

“I’m not interested in cars and my goal is not to make people envious. Don’t confuse the cost of living with the standard of living.”

His frugal lifestyle allows him to invest his money in productive assets. As a reminder, a productive asset is something that brings you money. Warren Buffett has always invested in the financial markets, which has enabled him to build his financial empire at Berkshire Hathaway.


4. Evaluate The Company First When You Invest

Whenever he has the opportunity, Warren Buffett loves to say that his favorite investment book is “The Intelligent Investor” by economist Benjamin Graham. Warren Buffett even considers it the best investment book ever written.

This best-seller by Benjamin Graham details the value-investing philosophy that made Warren Buffett his fortune.

Over the years, the evolution of the market has proven the wisdom of Benjamin Graham’s strategies. A fan of the first hour of this book, Warren Buffett was invited to write the preface to the new edition. He wrote:

“To invest successfully does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding the framework.”

The value-investing philosophy advances that you absolutely must thoroughly evaluate a company before investing your money on it. Take the time to study the fundamentals of this company and understand its business sector.

The financial market has moved somewhat away from this philosophy over the past twenty years to focus mainly on growth. This is something that Warren Buffett deeply regrets.


Conclusion

The advice given by Warren Buffett during his very long career has been numerous and constitutes a real gold mine for those who take the time to listen to them and above all to put them into practice. In this article, I have highlighted Warren Buffet’s 4 pillars of investment that will provide you with an excellent starting point if you want to make successful investments throughout your life.

It’s up to you to put them into practice now!

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Sylvain Saurel

Written by

Entrepreneur / Developer / Blogger / Author. In Bitcoin We Trust: https://www.inbitcoinwetrust.net

The Startup

Medium's largest active publication, followed by +644K people. Follow to join our community.

Sylvain Saurel

Written by

Entrepreneur / Developer / Blogger / Author. In Bitcoin We Trust: https://www.inbitcoinwetrust.net

The Startup

Medium's largest active publication, followed by +644K people. Follow to join our community.

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