Investment Lessons from Buffett's Shareholder Letter
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Berkshire Hathaway CEO Warren Buffett penned down his 54th shareholder letter earlier this week. Like every year, Buffett reported the company’s performance and gave insights on his and his partner’s, Charles Munger’s, thoughts about investment.
At the outset, the letter states the company’s compounded annual gain in per market share value between 1965 and 2019 at 20.3 per cent, whereas overall gain during the same period is 2,744,062 per cent.
More importantly, there’s wisdom galore that can be useful for investors. Entrepreneur India gives you two key takeaways from the letter.
Equity is for Long Term
Buffett is certain that equities will over time perform better than fixed-rate debt instruments. But, he adds a word of caution that markets are unpredictable and occasionally there will be major dips, sometimes as much as 50 per cent or more.
However, investors keen on investing in equities should not get bothered by market movements. He adds that equities are for those investors who can control their emotions during market movements and do not borrow for investing.
Criteria for Picking Business
The ace investor has in this year’s letter unveiled his three criteria strategy of buying a business.
- The business must earn good returns on the net tangible capital required in their operation.
- He places great importance on the management team and managers.
- Valuation of the business is important—they must be available at a sensible price.