CNBC has released good information about one of the biggest and important figure in business and investment world, Warren Buffett. Following this investment guru in Berkshire Hathaway annual meeting, the researcher from CNBC has successfully reveal the three main aspect that make Buffett become one of most successful investor in the history. Here is what they’ve found from the archive of Buffett achievement.
The Competent People around Him
Buffett said that every people have different understanding in business. Therefore, he stressed the importance of knowing what an investor capable of and when they should use that skill to operate their investment plan. This is what Buffett said as circle of competence.
Based on that statement, Buffett said that every investor must have companies that understand their area of expertise. By having these people around and they give support to the investor, the big mistake can be avoided, and success probability can be increased. More than that, Buffett also can understand more about the sustainability of the profit that he will get on the area where he want to put his money on.
Investment is a Business
Buffett inspired by the Ben Graham book, “The Intelligent Investor” when he still studied in University of Nebraska in 1949. Previously, he never succeeds in investing his money. He can’t make money from the stock market, even though he read and study many investing book in his younger age. The Ben Graham book basically tells him that investment in stock market is piece of business. In simpler way, basically an investor can’t see stock as a product or value that can increase anytime. Buffett stressed that investor must see stock as a business. Therefore, there will be more factors that can affect its value movement, which give investor broader view in investing then before.
Buffett also stated that an investor must have safety margin, in order to keep their investment from the risk. Buffett himself analyze the investment asset by looking at the entry price of that stock. The entry price must be lower than the estimated value that he did previously. The difference between these two value is his “margin of safety”, which can affect his decision to invest.
With those three, Warren Buffett has successfully conquered the stock investment. Buffett himself started from someone who doesn’t know about investment. But, by learning, which gives the result of those three factors, he can become one of the most successful investor in history.