12 simple lessons to learn from Warren Buffett

  1. Though there are good and bad companies, there is no such thing as good stock. There are only good stock prices, which come and go.
  2. Stocks do well or poorly in future because the businesses behind them do well or poorly —nothing more, nothing less. 
  3. Market timing is a practical and emotional impossibility. Since you cannot predict the behaviour of the markets, you must learn to predict and control your behaviour. 
  4. An investor must guard himself against unjustified market fluctuations. He would, therefore, be spared of the mental anguish caused by other persons’ mistakes of judgment if there were no daily market quotations available. Having built a portfolio, be patient—for years. Don’t look at the stock ticker every day.
  5. Risk is not in the stocks, it is in you. Risk is brewed from equal doses of ‘probabilities’ (realistically assess the probability of being right) and ‘consequences’ (how will you react to consequences of being wrong). In making decisions under uncertainty, consequences must dominate probabilities.
  6. Asset allocation is not dependent on age, but on one’s financial knowledge, experience and temperament. 
  7. Stocks are highly volatile in the short run. Therefore an all-stocks portfolio is not recommended. 
  8. One has to have considerable willpower to avoid getting into the bull market and getting out in the bear market.
  9. An average individual who put his money in mutual funds has fared better than an average person who invested directly in shares.
  10. Be wary of any advice. Use your judgment. 
  11. At the end what matters isn’t crossing the finishing line before others, but making sure that you do cross it.
  12. The only indisputable truth that the past teaches us is that the future will always surprise us—always!

The writer Sanjay Matai is the promoter of The Wealth Architects.

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