My most precious lesson from Warren Buffett

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March 5, 2023
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March 8, 2023

My most precious lesson from Warren Buffett

Like countless people who are in the field of investments, Warren Buffett is also my Guru. Not just because he is the greatest investor of all time but because of the deep insights he brings to the table. One of the gems he pronounces is this: ” If the Fed ( American equivalent of RBI) chairman comes and whispers in my ear what he is going to do with the rate of interest, my portfolio would not change even a bit”.

That was the profound realisation for me early in my career because till then I believed that to become good in investments, you need to predict the market movements.

Buffett clearly believed that market prediction is neither possible nor necessary. This surely is a big relief because you don’t need to break your head in forecasting the various unpredictable. Buffettology is quite simple- find  good companies with strong moat which will last for a very long time and keep the competitors away, ensure that the company is properly leveraged and then wait for the right price to strike a deal. Keep checking the story and ensure that your original convictions remain intact. This way, you hardly need to worry about the external changing situations. Holding such companies with a robust moat for a very long time will help you reap the magic of compounding. Buffett further adds that if you can do this-great, but if you can’t, then simply buy a S&P 500 index fund and continue to hold it forever.

If you look deeply, Buffett is advising to focus on things which you can understand rather than future gazing at the vast uncertainties around.

Though I advise mostly in mutual fund segments, the teachings of Warren Buffett are still most relevant nevertheless. Now with the benefit of hindsight of 23 years in this career, I know the successful investors are those who focused more on factors which are within their understandable reach such as their financial goals, their risk profile and their time horizon. And then there is a second set of investors who keep their eyes and ears on market movements, interest rate moves, geo political affairs, political situations etc. While the first set of investors harvested the power of compounding, the second set lost the time, lost the energy and lost the power of compounding.

Focusing on the internal and not the external world has a philosophical connotation and it’s extraordinary to see this in action in the realm of physical wealth as well.

Manoj Pandey