The three best investing tips from the ‘Buffett Archive’
Warren Buffett is one of the most celebrated investors in history. Many accomplished fund managers credited their success to following the Oracle of Omaha’s common sense value investing philosophy.
Buffett’s track record is unparalleled. From 1965 to 2017, Berkshire Hathaway’s rising market value generated a 20.9% annual return compared to S&P 500’s 9.9%, resulting in a cumulative gain of 2,404,748% versus the market’s 15,508% return.
CNBC researched Buffett’s strategy combing through decades of Berkshire Hathaway meeting transcripts using the Buffett Archive to find his best wisdom and strategies for the average investor.
Here is what we found.
1. Circle of competence
“Different people understand different businesses. And the important thing is to know which ones you do understand and when you’re operating within what I call your circle of competence.” — Warren Buffett, 1999 Berkshire Hathaway Annual Meeting
Buffett stressed the importance looking at companies that are within his areas of expertise to avoid large investing mistakes. He wants to know how a business makes money and be confident on the sustainability of its profit streams over the long-term. He called the process “judging the future economics of a business.”
He said if an investor is not sure if a company is within his or her circle of competence, it likely is not.