What Makes a Great Investor?

12-15-2022

vmdev|12-15-2022

I get this question all the time, and there have been numerous books written on the subject. Warren Buffett, with a net worth of nearly $100 billion, is one of the most successful investors in history. While many authors have tried to explain his tactics and strategies, I think they miss the two greatest lessons Buffet can teach us.

 

The first lesson is time. Buffett started investing at the age of 11, and has stuck with it for over 81 years. 

  • At 14 he had an investment portfolio of around $5,000, which he doubled to $10,000 by age 19. 
  • At 28, he bought his current home for $31,500, where he continues to live to this day. 
  • By the age of 30 he became a millionaire, and at the age of 55 became a billionaire. 

What Buffet did exceedingly well was learn how much money was enough to live off, and invested the rest over nearly a century. During that time, he never stopped saving, and never exited the stock market. By letting the power of compounding interest work in his favor, he amassed tremendous wealth.  

Which brings me to the second lesson: temperament. Warren has an unwavering conviction that stocks and the market will grow over time. During the last 80 years his steadfast temperament and conviction has been tested numerous times: stagflation in the ‘70s, the fall of the Soviet Union, 9/11, the financial crisis of 2008, and the Covid-19 pandemic. During each of these times, Buffett could have thrown in the towel and said, “the world is too crazy and I should sit this one out,” but he didn’t. Instead, he stayed in the market; this helped him build his fortune. 

So how can we apply these lessons today?  Well first, we need to make a distinction between being rich and being wealthy. Rich is what you can see on the outside, and has almost nothing to do with wealth. Rich is the house, the cars, the expensive jewelry, the clothes, and the Instagram-esque lifestyle some people sink their cash and savings into. 

Wealth is invisible; it’s the value of your company (if you have one), your general and retirement savings, and your stock portfolio. Too many of us spend too much time trying to look rich, and we don’t do the things we need to do to make ourselves truly wealthy. 

What we can learn from Buffett is this: figure out what you need to live on to meet your needs, hobbies, and creature comforts. Then save and invest the rest, and have the conviction in your future goals and dreams to continue to do so even when the world and life events may challenge you to stop.  

Wealth allows you the freedom to do what you want, when you want, with who you want for as long as you want. This is the ultimate freedom, and it’s priceless.

Source: Forbes Profile: https://www.forbes.com/profile/warren-buffett/?sh=10f468564639

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.

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