This really applies here10 Dec 2025 18:03
The Sage of Omaha, Warren Buffett, is arguably the best investor who ever lived which explains why 70,000 fans flock to Nebraska every year in the hope of discovering his investment secrets and insights.
I have been following Buffett since the early 1990s when a colleague gave me a copy of the Outstanding Investor Digest.
A large chunk of the publication was devoted to the questions and answers session from Berkshire Hathaway’s (BRK-B:NYSE) annual shareholder meeting.
I have since consumed many books about Buffett and two written by his business partner Charlie Munger, including his magnum opus Poor Charlie’s Almanack (see books section later in the article).
What follows are three investment principles which best define Buffett’s investment approach and underpin his track record.
NO 1: THE STOCK MARKET IS THERE TO SERVE YOU
At a presentation to students at Columbia Business School in the 1960s, Buffett unveiled a simple, but remarkably insightful observation.
Citing data from research and publishing firm Value Line which tracks around 1,700 publicly traded stocks, Buffett noted the average difference between a stock’s 52-week high and low was nearly 80%.
Buffett told the audience that business value does not change by 80% in a single year, implying stock prices can swing wildly away from fundamental values at times. Rational investors should embrace this feature of stock markets, not fear it, said Buffett.
The observation supports Benjamin Graham’s idea that the stock market is there to serve investors, not guide them.
Fear and greed drive stock prices away from fair value over the short term, but over longer periods, stock prices are driven by cash flow and profits.
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