Warren Buffett, the best investor in the world … started with $ 100 to become the third richest man in the world
The billionaire Warren Buffett is considered the best investor in the world and is the CEO of Berkshire Hathaway, which he became a part of in the early 1960s and went on to develop into one of the largest companies in the world.
According to Forbes, Warren Buffett is the second richest man in the world for the year 2017 after Bill Gates, with a fortune of $ 75.6 billion, and his fortune as of February of 2018 reached 87.5 billion dollars. His company is considered one of the top five profitable companies in the world. Buffett did not get his wealth from a single simple source, he did not inherit it, and he did not even use any magic powers, but rather he relied on investing in companies he deems worth investing and he worked to develop it out of his belief in the possibility of achieving many profits in the future. He always emphasized that success in investing and achieving wealth is not a complicated matter and is not always linked to risk, and anyone can achieve the same.
But the most prominent in Buffett’s career is he always owns cash in crises, and this helped him a lot in adjusting prices if the market fell significantly from the prices he had, and this is what distinguishes him from the rest of the big investors and speculators because he is known for his commitment in the financial markets, and he often stated that when he buys something Without its value, it buys as if it will sell after many years, and does not pay attention to anything else, and this idea worked with him strongly during the global crisis when the markets collapsed, and in that period you must have the cash at its time and the courage to enter the middle of this chaos. Buffett was a prominent player in it, although he sometimes bought at high prices and then prices fell, and he was buying with every major decline, and after years the market rose again and wiped out all the losses of the global crisis, then entered a new wave in which he achieved successive record highs each time.
The early beginnings of Warren Buffett’s investment business
Warren was born in 1930 in Ohama, USA. Buffett’s father was a stock market and stockbroker. Warren worked in that market in the brokerage house his father used to work in. Warren Buffett bought his first shares in Cities Services and later sold them for a small profit, learning the importance of investing in good companies.
Buffett’s first partnership
Prior to Benjamin Graham, Warren worked in the investment management field, where it was one of his favorite businesses, but he stopped doing so after a drop in the value of shares and was about to lose clients’ money. Warren then began to partner with his family and close friends. For example, Buffett invested only $ 100 while the partnership capital was $ 11,1,000, and he could increase his share in the partnership through reinvested administrative fees. Warren will receive half of the partnership’s profits, i.e. more than 4%, and will reimburse that partnership in the event that he incurs a loss, and furthermore, the partners should not have any contribution to the investments in the partnership.
By 1959, Warren had opened a total of seven partnerships and had taken up 9.5% or more of a million dollars of that partnership’s assets. Three years later, Warren Buffett became a millionaire merging all of his partnerships into one.
Purchase of Berkshire Hathaway
In 1962, Warren saw an opportunity to invest in a New England textile company called Berkshire Hathaway and bought some of its shares. Warren began buying the shares aggressively after a dispute with company management to convince them that the company needed a change of leadership. Understanding the importance of owning insurance companies – where customers pay premiums today to get those payments decades later – Warren used Berkshire Hathaway as a holding company to buy the National Indemnity Company (which is the first insurance company that Warren will buy) and used its cash flow. More acquisitions in Acquisitions.
Warren is a value investor, seeing that this was a low-priced company and buying it, regardless of the fact that he wasn’t an expert in the textile industry. Gradually, Buffett shifted Berkshire’s focus away from its old traditional endeavors, using it as a holding company to invest in other companies. Over the following decades, Warren purchased a variety of companies in various industries. Among the most famous subsidiaries of Berkshire Hathaway are GEICO, Dairy Queen, Net Jets, Benjamin Moore & Co.
All of these companies are just a fraction of the total companies in which Berkshire Hathaway holds a majority stake. In recent years, Buffett has acted as a financier and facilitator of major transactions. And during the Great Recession, Warren invested and loaned money to companies facing financial disaster. After about 10 years, the effects of these transactions began to appear, and the results were enormous. Here are some examples:
A loan led to Mars Inc. A profit of $ 680 million.
American Express Co. AXP is about five times its size since Warren invested in it in 2008.
Recently, Warren partnered with 3G Capital to merge J.H. Heinz, Kraft Foods and the Kraft Heinz Food Company creation. This new company is the third largest food and beverage company in North America and the fifth largest in the world, with annual revenues of $ 28 billion.
Buffett’s philosophy of investing in business is a variation of the approach to investing in value developed by his professor Benjamin Graham. Graham bought companies because they were cheap in relation to their intrinsic value. He believed that as long as the market gave the company he buys at a value less than the intrinsic value of the company, he would make a feasible investment decision when he bought it. He justified this by believing that the market will realize later that it has given the company less than its real value, which leads it to correct this value regardless of the nature of the business that the company practices.
The following are a number of questions that must be answered before a decision is reached regarding the purchase of the company, as stated in Buffett’s author, “Pavitologue”:
- Is the company located in a sector with a good economic base, and not in a sector that witnesses price competition?
Does the company have a consumer monopoly or a loyal brand?
- Can any company with abundant resources successfully compete with the company being considered for purchase?
Are owners’ revenues in an uptrend with good and continuous profits?
Low debt to asset ratio or high revenue to debt ratio? This means, can the company pay off its debts within years when revenues are below average?
Does the company have high and continuous returns on invested capital?
- The company keeps revenue that it allocates to growth?
Does the company reinvest its revenues in good business opportunities?
- Does the management have a good track record of making profits from these investments?
- Is the company free to adjust the prices of its products in order to absorb inflation?
Buffett also focuses on anticipating the purchase. He does not want to invest in businesses characterized by an inability to know their value. It is preferable to wait until the direction of the correction in the market or during the downward trends in order to be able to buy at reasonable prices, especially since the downward trends in the stock markets provide opportunities for buying.
Buffett is also known to be conservative when speculation is rampant in the market and as just the opposite when others are anxious and afraid for their money. It was this reverse strategy that led Yorkshire to bypass the cycle of boom and bust in the Internet sector in the year 2000 without suffering any harm.
Some investment advice from Warren Buffett
Avoid risk investing, in other words, avoiding investing when the market price rises or when it reaches its peak.
Focus on long-term investment, and avoid waiting for lucky strikes, that is, you have to rely on the investment that returns from the profits that the company makes after its development.
Use the right people to run your business, and Warren himself did not interfere with managing his companies, but rather entrusted them to professional managers who made him huge profits.
You should read, as it opens many areas of thinking for you.
Work in the field that you love, because it will motivate you to creativity that will inevitably lead you to make profits.
Be fearful when others are greedy, and be greedy when other people are afraid. ”
Finally, many observers believe that Warren Buffett is the best dealer in stocks and holds several titles, including Sage Nebraska, but without a doubt the title closest to him is the best investor in history. Of course, Buffett was famous for his many deals in which he not only achieved high profits, but also contributed to inflating his personal wealth and becoming among the 5 richest people in the world.
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This Is How Warren Buffett REALLY Made 85 Billion Dollars
Warren Buffett has been and continues to be a role model for millions of investors across the globe. His rich investment history going back to as far as 11 years old when bought his first stock, his impressive story has been used in hundreds of speeches globally, with every investor, beginner or pro, being asked to emulate him. However, who is Warren Buffet? In this video, we are going to look into the life of the man known as the “Oracle of Omaha”, highlighting the investments and decisions he made to become one of the richest and most respected businessmen in the world.