1996 Shareholder Letter (Verified). Action: Buy only what you understand. If the business model confuses you, move on. Buffett avoided tech stocks for decades because they were outside his "circle."
The concept of a "margin of safety" is the bedrock of value investing, inherited from Buffett's mentor, Benjamin Graham.
| # | Principle | The Question to Ask Before Buying | | :--- | :--- | :--- | | 1 | Circle of Competence | Do I truly understand how this business makes money? | | 2 | Margin of Safety | Is this price at least 25% below what it is worth? | | 3 | Mr. Market | Am I buying because of news (bad) or value (good)? | | 4 | Forever Holding | Would I hold this for 10 years if it never quoted a price? | | 5 | Economic Moat | Can a competitor kill this business by tomorrow? | | 6 | Business Owner | Would I want this CEO running my family business? | | 7 | No Debt | Could I survive a 3-year market shutdown without selling? | | 8 | Psychology | Is everyone else buying this? (If yes, run.) | | 9 | Integrity | Has management lied about earnings in the past? | | 10 | Patience | Is this a "fat pitch" or just a swing? | 10 golden principles of warren buffett pdf verified
Only invest within your "Circle of Competence".
However, to save you time, we have aggregated the ten most quoted, verified principles from those documents. Below is the canonical list. 1996 Shareholder Letter (Verified)
To Buffett, a stock is not a lottery ticket with a wiggling line on a chart. It represents ownership in a real business.
Only invest in businesses you truly understand. The Insight: Buffett argues that you do not need to be an expert in every company or even many companies. You only need to evaluate businesses within your "circle of competence." The size of the circle is not as important as knowing its boundaries. Buffett avoided tech stocks for decades because they
Before buying a share, ask yourself: "If the stock market closed for 10 years starting tomorrow, would I be happy owning this company?" If the answer is no, you are speculating, not investing. Buffett looks for businesses that have understandable models, consistent earnings, and a durable product. If you don't understand how the company makes money, you cannot predict how it will grow.
“You don’t have to be an expert on every company. You only have to understand the business you are investing in.”
This article outlines 10 golden principles of Warren Buffett’s investment strategy, drawing from his legendary Berkshire Hathaway shareholder letters, annual meetings, and authorized insights to help you build a sound investment foundation. 1. (And Rule #2: Never Forget Rule #1)