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Warren Buffett’s 5 Investing Lessons You Must Know

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Warren Buffett

Warren Buffett will celebrate his 92nd birthday today. So, we thought it is an excellent time to look at his life, his investing journey, and ways you can create sustainable wealth through equity investments.  

Are you ready? Let’s go…

How did the Berkshire Hathaway founder make $53,000 as a teenager? 

At a young age, Warren Buffett did everything he could to make money. He earned his first cent by selling chewing gums in the neighborhood, Juicy Fruit, Spearmint, and Double mint in packs of five for a nickel. Interestingly, little Buffett did not allow customers to buy a single unit of chewing gum; they had to buy a whole pack. 

This strategy of waiting patiently to reap the rewards is evident in his business today. He believes that very few practice the discipline of saying “NO” to something they are uncomfortable with for quick profits. It’s why he hasn’t split Berkshire Hathaway’s shares. 

At 13, Warren Buffett delivered newspapers in his neighborhood. It could be a mind-numbing job to most, but it gave Warren the time to ponder things he always wanted to think about. So it is how Buffett describes his experience as a paper boy. 

“I liked to work by myself, where I could spend my time thinking about things I wanted to think about […] I could be sitting in a room thinking, or I could be riding around flinging things and thinking.”  

Perhaps, he invested in The Washington Post because of his relationship with newspapers. 

At 15, Warren earned $2,000 delivering newspapers, of which he invested $1,200 in a 40-acre farm in Nebraska. He hired a farmer to work the farm. He used the same approach when he bought weak businesses and asked the owners to manage the operations. 

After earning enough money, he set up a small business with his friend Stu Erickson calling it “Buffett’s Used Golf Balls.” He and his friend sold used golf balls at the Elmwood Park golf course. He would buy refurbished balls from a man in Chicago for $3.50/dozen and sell them for $6/dozen. 

Buffet has also turned tickets at the race tracks, sold stamps to collectors, and set up a car buffing, which he shut down later. But he started liking cars, and that’s why he has been a loyal investor in General Motors and BYD

His friend and he set up pinball machines at barber shops, and the business was a hit. Whew! What an expert hustler. 

We read about Warren Buffet’s childhood, hustles, and how he earned $53000 as a teenager. But he had his share of regrets too. Want to know more about them? 

5 Mistakes Warren Buffett Regrets Making

Investors admire Buffett for his keen eye for finding great businesses with immense potential. Still, he had his set of failures, too, costing Berkshire shareholders billions of dollars in losses. 

1. Investing in Berkshire Hathaway.

Aren’t you wondering how he can regret investing in the company when it is the most expensive stock globally? Before it climbed to the top, Berkshire Hathaway was an ailing textile company in 1962. In a 2010 interview on CNBC, Warren Buffett called Berkshire Hathaway the dumbest stock he had ever bought. 

He pumped around $200 billion and managed the business for two decades before it became profitable. His advice is – Don’t let emotions take over your financial decisions

2. Investing in Tesco. 

Tesco is a UK-based multinational grocery and general merchandise retailer. At the end of 2012, Berkshire owned 415 million shares of Tesco. 

Buffett sold some stocks but still owned a sizeable chunk in the grocer. Then, in 2014, Tesco overstated its profits, and shares tumbled. 

In a 2014 letter to shareholders, Buffett mentioned concerns that Tesco’s management triggered the initial stock sale, earning Berkshire $43 million in profit. But, unfortunately, he dawdled on offloading Tesco’s stocks. So the fall in Tesco’s stock cost Berkshire a $444 million after-tax loss. His advice is – Be prompt in deciding if you sense irregularities in a business you invest in. 

3. Investing in Energy Future Holdings bonds

Warren Buffett calls purchasing debt from Energy Future Holdings a sheer debacle. Formerly known as TXU Corporation, Energy Future Holdings is a power generation company. In 2007, Berkshire purchased high-yielding bonds worth $2.1 billion from Energy Future Holdings. 

Buffett believed that Natural gas prices would rise and Energy Future Holdings would have a competitive advantage over other power companies, but they didn’t. 

In 2007, natural gas prices were around $10-13 per BTU (British thermal unit). Then, after a brief spike, the price plummeted to $3-4, and today is priced at $4.78. 

The fall in natural gas prices meant Energy Future Holdings struggled to repay the debt. 

Berkshire sold its holdings for $259 million in 2013 after suffering an $873 million pre-tax loss. His advice – Even if you are a great decision maker, always seek a second opinion from an expert.

4. Not investing in Amazon

Warren Buffett says Jeff Bezos is the most remarkable business person of our age though he did not invest in the retail giant Amazon despite admiring it. Today, he regrets his decision.

Buffett did not understand Amazon’s business model, believing the price was more than the power its business model reflected then. Other than financial stability, and future growth of a company, Buffett also looks at the business model. As a result, his investments never include businesses he does not understand, which can be good and bad. 

Picking companies blindly is not intelligent, but you must not miss out only because you don’t understand the business model. His advice –No one knows everything. So seek a subject expert’s advice if you have any queries about a stock.

5. Missing out on Google

Besides Apple, Google is one of the big five companies in the world. However, Buffett’s Berkshire does not hold a single share of a tech giant. In a 2017 letter to shareholders, Buffett expressed his regret for ignoring the opportunity to invest in Google when it was available at $10 per share from Geico – now a wholly owned subsidiary of Berkshire. 

Buffett has shied away from tech stocks because he didn’t understand their business models. However, he should have learned more about Google as he was a client of Google ads. His advice is – Do not ignore great opportunities when they come knocking at your door. If you don’t understand it, seek a subject expert’s advice. 

Despite missing out on wonderful opportunities, Warren Buffett is admired for his ability to find great businesses to invest in. That’s why, he is the 7th richest person on this planet, with a $100.9 billion net worth as of August 29. 

To summarize, here is an excerpt from Morgan Housel’s authored “The Psychology of Money.”

“When we pay special attention to a role model’s successes, we overlook that their gains came from a small percent of their actions. That makes our failures, losses, and setbacks feel like we’re doing something wrong. But we may be wrong, or just right, just as often as the masters are. They may have been more right when they were right, but they could have been wrong just as often as you.”

Read more: About Research and Ranking

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I’m Vinay Mahindrakar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

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