Who is Warren Buffett?

Before we discuss Warren Buffett’s 6 Rules of Investing, we have to identify first

who Warren Buffet is. Warren Edward Buffett is an American who has achieved great
success through the ownership of multiple lines of enterprise. Buffet’s currently the Chief
Executive Officer & Chairman of Berkshire Hathaway Incorporated, which is an American
multinational conglomerate (multi-industry company) holding company headquartered in
Omaha, Nebraska, United States. He runs Berkshire Hathaway, which owns almost 60
companies, involving insurer Geico, battery maker Duracell, and restaurant chain Dairy
Queen. Warren, known as the “Oracle of Omaha”, Warren Buffett is one of the most famous
& successful investors of all time. Despite being successful, Warren didn’t forget to give
back to the economy, he donated over 99% of his wealth. He gives more than $45 billion,
mostly to the Gates Foundation and his kid’s foundation.

How Warren Buffett got rich?

Buffet got rich & became a billionaire when Berkshire Hathaway began selling class
A shares on May 29, 1990, with the market closing at $7,175 a share. In 1998, he purchased
General Reinsurance Corporation (Gen Re), an American multinational corporation
offering a range of reinsurance products & services. This serves as a subsidiary in a deal
that presented difficulties—according to the Rational Walk investment website,
"underwriting standards proved to be inadequate," while a "problematic derivatives book"
was resolved after numerous years and a significant loss.[52] Gen Re later provided
reinsurance after Buffett became involved with Maurice R. Greenberg at AIG in 2002. Now,
how did Warren Buffett get such great results and become one of the richest investors in
the world? These results came from investing in companies and following a set of key
principles or 6 Rules of Investing.

Warren Buffet's 6 rules of

Investing
1. Cash is Not a Good Investment
- Cash is never a good investment. Since cash doesn’t grow in value and does not earn
any potential returns, in fact, inflation erodes its buying power over time. “Get out of
cash and get into assets” because we haven't any idea yet what will happen to the
dollar. According to Warren, cash is always a bad investment, he believes that cash
wasn’t producing anything and it will be unhelpful to potentially have better
investments, it was sure this value could go down over time. He also said that we
will have enough cash around but he is still unhappy, he would much prefer to have
good businesses than cash. 30 years from now, dollars or money are going to be
worthless, in a way that every currency he can think of is how much it depreciates,
but cash is not the right place for that.

2. Invest in Productive Assets

- Invest in Productive Assets - Productive asset means assets that are used by the
Company and its Restricted Subsidiaries in Permitted Businesses. According to
Buffett's Rules of Investing, you should invest in productive assets such as stocks,
bonds, and real estate. If you owned all the gold in the world, you could have a cube
that would be 67 or 68 feet. He said that always choose or invest in an asset that you
value based on its ‘what it will produce’, ‘what it will deliver. For example, you buy a
farm because you expect a certain amount of corn or soybeans, or whatever it may
be, and you decide how much you pay based on how much you think the asset itself
will deliver over time. In short, there’s some logical follow-on to that, and you can
make rational calculations. Also, Warren said that the success of that investment
depends on your mindset as to meet your expectations as to what it delivers.
Logically, you should not care whether you get a quote on that business a year later,
rather than look to the business. Like when it comes to security, when we buy
 marketable securities, you should not care if the stock exchange closes for a few
years. So, look at what you think can be delivered from the productive assets that
you own, and how you can utilize that capital in purchasing and re-invest more
productive assets & using it to pay off other bills or expenses.

3. Stay in your circle of competence

- The circle of competence is the subject area that matches a person’s skills or
expertise. The concept of the Circle of Competence has been used for more than a
year by Warren Buffett, this means that investors must focus on only operating in
areas they know best. The bones of the concept appear in his 1996 Shareholder
Letter. According to Warren, identifying your skills or expertise is the most effective
way in investing. He said that you don’t have to be an expert in everything or every
company. However, you can evaluate companies within your circle of competence,
knowing where the perimeter of that circle of ‘what you know and ‘what you don’t
know is’ and staying inside of it is all-important. Tom Watson Sr, founder of IBM,
said in his book “I’m no genius, but I’m smart in spots - but I stay around those
spots” and that is the key. Buffett reminds us that we do not need to understand
everything when it comes to investing capital, as long as we can define what we do
know and stick to those areas. Our circle of competence can become wider, but only
gradually and over time.

4. Evaluate Company's First

- Warren Buffett’s strategy for choosing winning stocks first you have to evaluate the
company based on how much it is selling for, how much do we think it’s worth or
based on his value investing philosophy. Buffett didn’t look at the price first, he
looked at the business first and tried to figure out what it’s worth. Because, he
believes that if he looks at the price first, he’ll get influenced by that. But, look at the
company first, and he tries to value it, then what he has just valued at that he’s going
to buy it. In addition, Warren Buffett finds companies that can provide a good return
on investment over many years, also companies that provide unique products or
services that allow them to outperform their competitors.

5. Play Big and Don’t Waste Opportunities

- Just like in books, each content of the book has a different genre, story, knowledge &
concept that differ each book from the other. And that’s what life is all about, each
one of us has our unique characteristic, different purpose & meant to be in this in
your life and this will be different within other people. So don’t you ever compare
 yourself to them. Maybe, they are the ones who are first to achieve success at a
young age, but it’s not mean that you won't achieve yours. Keep in mind that an
opportunity just like this has also destiny for you. Not just now, but it will be worth
it at the right time. Instead of feeling sad, why don’t you just find ways to inspire you
to improve your life & to be like them? Not all your life, you've been just like this, see
every day as an opportunity to improve your lifestyle. And don’t agree their level of
life is changing while yours are not. Sometimes later becomes never. Do it now.
- Anyhow, Warren said that “big opportunities in life have to be seized” - we don’t do
very many things, but when we get the chance to do something right and big, we’ve
got to do it. and even to do it on a small scale is just as big of a mistake as not doing
it at all. I mean, you got to grab them when they come. Because you’re not going to
get 500 great opportunities. You would be better off if… you got a punch card with
20 punches on it. And every financial decision you made you used up a punch. You’d
get very rich because you’d think very hard about each one. I mean if you went to a
cocktail party and somebody talked about a company and they didn’t even
understand what they did or couldn’t pronounce the name but they made some
money last week in another one like it, you wouldn’t buy it if you only had 20
punches on that card. There’s a temptation to dabble – particularly during bull
markets – and in stocks, it’s so easy. It’s easier now than ever because you can do it
online. You know you just click it in and maybe it goes up a point and you get excited
about that and you buy another one the next day and so on. You can’t make any
money over time doing that. But if you had a punch card with only 20 punches, and
you weren’t going to get another one the rest of your life, you would think a long
time before every investment decision – and you would make good ones and you’d
make big ones. And you probably wouldn’t even use all 20 punches in your lifetime.
But you wouldn’t need to.”

6. Invest in Yourself
- According to Warren Buffett, investing in yourself is the best way to find a
successful life. Like Buffett, that success is achieved by making smart investment
decisions. In a 2019 interview with Yahoo Finance editor-in-chief Andy Serwer,
Buffett said: "By far the best investment you can make is in yourself." This may be
the most valuable of all lessons from the Oracle of Omaha. To make the most of your
investment means never stop acquiring knowledge -- the kind of knowledge that
betters yourself as a whole person, not just as an investor.
- 3 ways to do it:
 Invest in improving your communication skills - Buffet said, “If you can't
communicate, it's like winking at a girl in the dark--nothing happens. You can
have all the brainpower in the world, but you have to be able to transmit it.
And the transmission is communication.”
 Invest in improving your leadership skills - Buffett tells us about one of the
essential non-negotiable traits that leaders must have on this trait, which is
integrity. The Oracle of Omaha once said: “We look for three things when we
hire people. We look for intelligence, we look for initiative or energy, and we
look for integrity. And if they don't have the latter, the first two will kill you,
because if you're going to get someone without integrity, you want them lazy
and dumb.”
 Invest in improving your business relationships - One of the ways for success
is to surround yourself with the right people, meaning people who have
dreams, desires, and ambitions that are the same as you. Buffett spoke with
some college students a few years back and said, “You will move in the
direction of the people that you associate with. So, it's important to associate
with people that are better than yourself." - they’ll help you push for, and
realize your own.