Thursday, December 24, 2009

Investment lessons from Warren Buffet and Bill Gates

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PBS played "Buffet and Gates goes back to school" the other day, and there are a lot of good lessons for investors. These are not in particular order, and are NOT the exact words uttered, but the meaning is accurate.

Gates: Warren [Buffet] taught me this, "Be good at saying no."
Buffet: Save "yes" for important stuff.

Investment-wise: Buffet had said it before, you don't need to invest on every "good" stock that comes by. There is no need to "swing" at every pitch. They meant time management, but it works for investment as well.

Buffet: Outer scorecard is hollow when it's all through. Keep your inner scorecard to be happy internally.

Investment-wise: When you invest, you can't worry about other people's opinion of your investment. Your investment is your problem, your responsibility, and nobody else's. You are investing for yourself. Thus, your own inner scorecard is the one that matter.

Buffet: investing is about thinking for yourself. Groups get homogenized, and brilliant decisions do not come out of a committee.

Investment-wise: If you follow the crowd, you will be late to the party. You can't wait until like X analysts decide your stock is worth investing. Analysts are people too, they hang in groups, and they play "follow the leader" also.

Gates: Advisors should be good at spotting your blindspots and alerting you to them, but should not give you decisions.

Advisors are there to advise, not to make the decision FOR you. They are there to make sure you have considered all angles, or perhaps be aware of a new perpective on the problem. But at the end, you must make your own decision. Else you are letting a committee decide for you.

Buffet: Most investment mistakes are one of omission, as in "things that were not done", instead of an outright "I invested in the wrong company".

Buffet went on to point out that because he doesn't understand tech, he missed out a lot of the opportunities tech companies could offered. And there are plenty of OTHER companies, that he KNEW were good opportunities, but for one reason or another he did nothing, and the opportunity expired. Those he considered his mistakes, but he know they're mistakes.

Buffet: Triumphs are partly triumphs because you can and do make mistakes. Don't dwell on the mistakes, just learn from them and move on.

In other words, if there are no mistakes, there are no triumphs. If there are no darkness there would be no light. And so on. Accept that you can and will make mistakes. No one can be right all the time. Risk is a part of life, especially investing. Learn from the mistake and move on.

Buffet: Surround yourself with high-grade people.

This corresponds with Rich Dad's advice: "Don't be average." Mr. Kiyosaki said once in a seminar (by phone) for an average woman to look beautiful, she should surround herself with three ugly women. It's a joke, but the lesson is people do tend to seek similar people, as a part of one's social needs. Thus, they end up like their peers: average. If you surround yourself with high-grade people, you will rise to their level.

Enjoy the lessons.

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