Case Study: Warren Buffett, part 1

Case Study: Warren Buffett, part 1

A cursory glance at Ideas on How to Become Rich will reveal that I am a fan of Warren Buffett and that this author personally thinks that Warren Buffett is one of the greatest investors in the stock market on earth, and that Warren Buffett's money making techniques are the best. Well, that's because it's true, and besides, as I've already said before, this site explores ideas on how to make money and become rich, and Warren Buffett has used value investing to make intelligent investment decisions that have made him the richest man in the world, correct as at 2008, according to Forbes.

There are a few points to note in this introduction to the greatest investor:

What Warren Buffett does to make money has been documented.

What Warren Buffett does to make money can be learnt and reproduced, because he himself learnt the key ideas from a man called Benjamin Graham.

What Warren Buffett does to make money is nothing spectacular and can be summarised in a few key terms and concepts, which then need to be applied.

In summary, the key concepts that Warren Buffett employ are all basic tenets of value investing which depend on fundamental analysis: see stocks as businesses; use market fluctuations to your advantage; always have a margin of safety; use your common sense.

Value investing and fundamental analysis have been covered in great depth here on my money making site, but here is a short summary for revision and for clarity: value investing is an investment paradigm that looks at intrinsic value of a company, and concomitantly its stock. Value investing is closely related to fundamental analysis, which is analysing a stock by looking closely at its values and fundamentals, such as the price-earnings ratios, the assets that the company owns, the debts that it owes, and other fundamental aspects of the company that one should know if one puts money into it. In simple summary - value investing is about value, and fundamental analysis is analysis by looking at a company's fundamentals.

Warren Buffett is my investment hero because he is able to use his skills and techniques that Benjamin Graham espoused to make a lot of money on the stock market. The secret has been out for years and yet few have been able to make full use or take advantage of what Warren Buffett and Benjamin Graham have said and taught, strangely.

So, for absolute beginners to Ideas on How to Become Rich, who exactly is Warren Buffett?

Warren Buffett is an American investor and philanthropist. He started out in investment when he was very young, and was always very entrepreneurial. One day he studied under Benjamin Graham in university and learnt the key skills of investment, and then later did indeed work for Graham in his investment partnership company. However, Warren Buffett found that although he agreed with the intellectual concepts and ideas that Graham taught him, he did not agree with how Graham ran his company and felt that Graham missed out on a lot of winners precisely because of his narrow definition of margin of safety.

Using the concept of margin of safety and other key skills he learnt from Graham, Warren Buffett then set up his own partnership, and the rest, as is commonly said, is history. Warren Buffett went on to become one of the world's best investors and then became one of the world's richest, and then finally Warren Buffett became the world's richest man. Warren Buffett currently runs Berkshire Hathaway and is involved in investment and charity at the moment, as he had given some billions away to Bill Gates, who is also a noted philanthropist. This basically sums up Warren Buffett for people who do not know who he is.

Here are some Warren Buffett quotes here on Ideas on How to Become Rich, to see how the Sage of Omaha/ the Oracle of Omaha gives his investment wisdom in clear, lucid and vivid analogies and stories. Click here for Warren Buffett quotes and investment sayings.

In addition, click here to find out more about the investment paradigm of fundamental analysis and how it differs from technical analysis. Do remember to read up here on this site, and do please enjoy your research into these two important, key concepts here.

More detailed analysis of these to come, here on this series on Warren Buffett:
see stocks as businesses; use market fluctuations to your investment advantage; always have a margin of safety; and use your common sense when it comes to investment. All these key ideas and important concepts will be dealt with in the next post on Warren Buffett, as they are all important ideas on investment and important ideas on how to become rich. Stay tuned!