Sure, Warren Buffett is a goofy-looking old guy with outdated glasses.
But the billionaire investor is a genius when it comes to understanding how money works. That’s why I admire him so much.
I have no illusions of getting mega-rich, as Buffett has done. But I would like to have his confidence when it comes to managing money. I’d like to feel I was controlling my finances, instead of vice versa.
So I decided to learn more about Buffett’s approach. I bought The Warren Buffett Way by Robert G. Hagstrom.
“Whereas most investors think in terms of hundreds or perhaps thousands, Buffett moves in a world of millions and billions,” the introduction says. “If we look at what he does … and are able to discern the underlying thinking, we can model our decisions on his.”
Making the correct investment moves can seem overwhelming. I’ve often thought if I had no distractions (such as a job and a kid), I might have time to get financially savvy. But I, and you, don’t have that luxury.
We need to adopt a few sound financial principles and stick to them. That’s the message of The Warren Buffett Way.
You don’t have to be a genius
“We don’t have to be smarter than the rest,” the book quotes Warren Buffett as saying. “We have to be more disciplined than the rest.”
Buffett also said, “You need the temperament to control the urges that get other people into trouble investing.”
This book isn’t full of complex charts and formulas for making money. Instead, it focuses on adopting the right attitude about investing.
Chapter 11 is called The Psychology of Money.
“True investors are calm,” it says. “True investors are patient. True investors are rational.”
The opposite extreme: becoming giddy when your investments do well and bummed when they don’t.
“When it comes to investing, emotions are very real, in the sense that they affect people’s behavior and, thus, ultimately affect market prices,” Hagstrom writes. “Successful investors need a certain kind of temperament.”
The same could be said for parenting: Kids can drive us crazy if we overreact to every high and low. We need a calm, rational approach to parenting that isn’t shaken when the unexpected happens.
I don’t always succeed with my son, but I get back on track fairly quickly. Experience has taught me to do so.
After reading The Warren Buffett Way, I’m more confident in investing because I see the parallels to parenting. In both, you’ll hear a ton of conflicting advice. But stick to some proven principles, and you’ll be OK.
Don’t be intimidated by financial planning. If you are, you’ll become immobilized or make the wrong decisions. Learn the basics of money management. Realize you’re going to make mistakes, but learn from them. Successful investing (like parenting) occurs over the long haul.