Buffetology: Mantras for Investors

The grand old investor 'Warren Buffet' was in India recently. He has once again reiterated his opinion on India as a compulsive investment destination for any investor. He has returned to India to scout for attractive investment opportunities for his companies. It would be worthwhile to revisit the investment philosophy of the legendary investor.

The term 'Buffetology' has been coined by authors Mary Buffet and David Clark in their book titled 'The New Buffetology'. The greatest contribution of Buffet to the cause of Indian investors has been his passion for bringing the gains from long term investing to the centre stage. Unfortunately, in India the focus of investment has been on making money through short term gains, which is detrimental for the psyche of investment. The idea of long-term investment is treated somewhat like a doctor’s advice to start exercising and eat healthy. Most people agree that it’s good in theory, but few actually get around to doing it. Buffet's life and his success demonstrates that all you need to do is to understand a few simple things and do them faithfully over the long-term, with the long-term measured literally in decades, not years.

Here are a few pillars of the so called 'Buffetology':

• Invest in companies companies with consistently high rates of return on equity, preferably rising.
• Rule No. 1: Never lose money.
  Rule No. 2: Never forget rule No. 1
• Invest in a business that even a fool can run, because some day a fool will.
• Time is the friend of the wonderful company, the enemy of the mediocre.
• Simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
• You only have to do a very few things right in your life so long as you don't do too many things wrong.

Let us derive inspiration from these words of wisdom and create wealth for ourselves through the concept of 'Value investing' propounded by the legendary Warren Buffet.