How are some investors so much more successful than others? How do they do it and what is their secret?
Well, most successful investors after years of experience follow specific values and principles that help them stay focused in the market and tackle market volatility.
Today, we are talking about some legendary investors in the world and the investing principles that have helped them attain financial success and prosperity.
Warren Buffett
We will start with the most popular and famous investor of all time, Warren Buffett. Mr. Buffett, also known as “The oracle of Omaha” has a net worth of over $108 billion. He runs the conglomerate Berkshire Hathaway as its chairman and CEO.
Investing principles: Warren Buffett is a believer in the famous value investing principles. Value investing is a principle that aims to purchase stocks or securities that are believed to be undervalued by the market. The basic idea is to buy low and sell high.
Value investors buy stocks when the price is lower than the intrinsic value and then hold on for a long time with the belief that the market will eventually recognize their true worth, leading to a rise in the stock’s price.
Value investing is considered a long-term strategy, as it can take time for the market to recognize the true worth of a company. Buffett is also a huge believer in investing for the long term as opposed to speculating the markets.
Buffett has a net worth of $108 Billion as of February 2023 and is the 5th richest person in the world. He started investing when he was just 11 years old and by 16 he had amassed more than $53,000 from various business ventures and investments.
Peter lynch
Peter Lynch is not only one of the most successful investors of our time but also a classic rags-to-riches story of the investment world. He went from being a caddy at a golf club to becoming the manager of the Magellan Fund at the major investment brokerage Fidelity.
Investing principles: Peter lynch is famous for his “buy what you understand” principle of investing. He focuses on investing in companies that are in your interest area so that it becomes easy to understand them and keep updated with their latest developments.
He was also a big believer in holding the stock for the long term as is evident from his famous saying, “absent a lot of surprises, stocks are relatively predictable over 10-20 years. As to whether they’re going to be higher or lower in two or three years, you might as well flip a coin to decide.”
Peter Lynch invented the price-to-earnings-growth (PEG) ratio. It is a valuation metric that measures the relationship between a company’s price-to-earnings (P/E) ratio and its earnings growth rate. The PEG ratio provides a more comprehensive view of a company’s valuation by taking into account both the stock price and the earnings growth rate.
Due to his success in investments he was able to retire at the age of 46. During the 13 years under his reign, the Magellan fund earned an annualized return of 29.2%, more than twice what the S&P 500 earned during that time.
Charlie Munger
Charlie Munger is famous for being the right-hand man of Warren Buffett and vice chairman of the famed holding company Berkshire Hathaway. Charlie Munger worked as a meteorologist in world war 2 and went to Harvard Law School. His total net worth as of Feb 2023 is $2.3 Billion.
Investing principles: Munger like his partner Warren Buffett is a believer in the value investing principle. He is also a huge believer in staying patient and consistent with your investment.
His book Charlie’s Almanack has a 10-point investing checklist that includes being focused, measuring risk carefully, thorough research, and wise asset allocation amongst others.
Munger founded a successful law firm in California and was a real estate attorney until Buffett convinced him to leave law and join him. During his childhood, he worked at Buffett & Son, a grocery store owned by Warren Buffett’s grandfather.
Shelby Cullum Davis
Shelby Cullom Davis was a legendary American investor, he created Shelby Cullom Davis & Company. Davis started investing at the age of 38 and he amassed a $900 million fortune and joined the list of the Forbes 400 wealthiest individuals by the time of his death at 85.
Investing principles: Shelby Davis made his fortune investing primarily in insurance stocks. He was a follower of Benjamin Graham and believed in value investing, he looked for undervalued insurers. Another investing principle that he followed was investing for long periods of time. He had a long-term investment outlook.
Davis started investing late but still managed to accumulate considerable wealth because he invested heavily in the insurance sector. He amassed a $900 million fortune and joined the list of the Forbes 400 wealthiest individuals by the time of his death at 85.
Benjamin Graham
Famously known as the father of value investing. His famous book The Intelligent Investor, is widely considered the value investor’s bible and is followed by many other legendary investors like Warren Buffett.
Investing principles: Value investing is the approach that involves analyzing stocks and other securities to determine their intrinsic value or the true worth of a company’s assets and earnings and then investing in those securities that are trading at a discount to their intrinsic value. Value investors believe that the market sometimes overreacts to bad news, creating opportunities to purchase stocks at prices below their true value and that over the long term, the market will eventually recognize the company’s value, leading to a profitable return on investment. The key principles of value investing include a focus on fundamentals, a margin of safety, a long-term investment horizon, and a contrarian approach to the market.
He met his student and mentee, Warren Buffett at Columbia University where he was a professor and Buffett was his student. Buffett was very deeply influenced by Graham and followed his investment principles. Buffet even named his first son after Graham.
By the age of 25 Graham was earning $500,000 but he lost all his money in the stock market crash of 1929.
Legendary investors have left an indelible mark on the world of finance and investment, and their insights and strategies continue to inspire and inform investors of all backgrounds and experience levels. Whether it’s Warren Buffett’s emphasis on long-term value, or Benjamin Graham’s focus on intrinsic value, the lessons and philosophies of these investors offer valuable insights into the art and science of investing. By studying the approaches of these investing legends, we can gain a deeper understanding of the markets, develop sound investment strategies, and potentially achieve long-term financial success. Ultimately, the legacies of these investors serve as a reminder that with discipline, patience, and a commitment to fundamental principles, anyone can achieve success in the world of investing.
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: All about multi cap funds with Rahul Singh, CIO – equities, Tata Asset Management
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today. #MutualFundSahiHai #KuveraSabseSahiHai
