How did Warren Buffett get so Rich?

Warren Buffett is the richest man on earth or at least in the top 3 depending on the moment. He is the most famous stock market value investor on the planet.

A ‘value investor’ is someone who invests in companies with a long term perspective. They buy a stock and hold it for a long time whereas a ‘trader’ buys and sells frequently depending on news and current events affecting prices.

Mr. Buffett took $105,000 as an initial investment and turned it into more than $30 billion. He did this by avoiding Wall Street fads like the Dot Com Boom and investing in companies with good ‘long term economics’. Most people buy and sell on good and bad news because of their short sightedness. When short-term bad news hit driving the stock price of a great business down, Warren would jump in and buy many shares at basement prices.

The pillar of Buffett’s investing is choosing companies that he considers to be consumer monopolies and buying them at bargain prices. These are companies that are usually well known brands and can’t easily be copied or made redundant by competitors. He made a few large investments in businesses like The Washington Post and Coca-Cola that compounded returns into the billions over the years.

The investments he tries to avoid are business he considers to be commodities. These businesses can easily be replaced by other businesses, they have no dominance or strong brand in the market place.

I am reviewing the Buffettology workbook so I’ll be making a lot of posts about what I learn. Even for someone not interested in investing in stocks it’s really great because analyzing companies teaches you about business and can really help up your financial IQ for starting or improving your own business. (The greatest investment of all!)