6 End of the year thoughts from Warren Buffet
New year is approaching, and looking back to the savings interest rates evolution this year, I believe we might pick some learnings from Warren Buffet that our Ezonomics colleagues compiled that I found helpful to improve own financial performance.
Each year, Buffett issues a letter to Berkshire Hathaway investors, giving a glimpse into his thoughts about financial markets. Although usually associated with professional investing, Buffett’s thoughts often relate to how individuals can manage money better. Billionaire investor Warren Buffett has found fame as well as fortune in his high-profile, hugely successful career.
The Ezonomics picked six extracts from Buffett’s letters to demonstrate this – including a practical letter from Buffett’s grandfather on the importance of emergency savings and sweet words about Buffett’s wife and family home.
Me, myself and I
In 2008, Buffett noted that he runs the company in a cautious manner, always with “more than ample cash. We would never want to count on the kindness of strangers in order to meet tomorrow’s obligations.” From a personal finance point of view, this may be interpreted as, in uncertain times the only person you can rely on financially is yourself– wise words about planning and preparation.
Prepare for the “rainy days”
In 2010 , Buffett quoted a 1939 letter from his grandfather Ernest to his uncle Fred, Ernest’s youngest son. The letter was about a $1 000 gift and the importance of having money saved to use in emergencies. Buffett uses the letter to explain the importance of rainy day money, quick access to cash to use when needed.
Beware of the bubble
In 2011, Buffett urged caution about “bandwagon” investing – when investors flood in to buy an asset, pushing the price too high. He highlights the dot.com boom and US house prices as examples. Of course, before they pop, bubbles are notoriously hard to spot.
The time is now
In 2005, Buffett said “when a problem exists, whether in personnel or in business operations, the time to act is now.” A swift response is better than trying to pretend problems do not exist.
Understand what you are buying
As far back as 1992 , Buffett stressed he only invests in businesses “we can understand”. Knowing what you are buying and how the investment works is hugely important. Being tempted by promises of high returns on products that cannot be easily understood can be a recipe for disappointment – or worse.
Money isn’t everything
In 2010, Buffett turned personal when highlighting his three top investments. The best two were wedding rings followed closely by his family home. “For the $31,500, I paid for my house, my family and I gained 52 years of terrific memories with more to come.”
Every company wants to be green, ethical, responsible, socially conscious etc. Is this possible? And does Sustainable and Responsible Investment really make a difference?
If you have followed the previous posts you are an advanced saver by now! If you have managed to set aside some spare savings that you will not need in the short term you should continue to read this article…
A share is a unit of ownership delivered by a capital company. In most cases, it is a commercial company with a limited liability. Holding one of several shares – in other words, being a shareholder – means that you own a part of the company’s capital but you are not held personally liable for the company’s debts.