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How to learn from your financial failures like Warren Buffett
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At 93 years old, Warren Buffett – the renowned co-founder, chairman and CEO of Berkshire Hathaway – was at the investing I’ve been playing for a long time. From buying his first shares at age 11 to earning a net worth of US$135.1 billion (Image: Instagram)at last count), the seventh richest person in the world learned some hard lessons along the way.
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“The Oracle of Omaha” has wealth-building rules that are familiar to even the greenest inventor. However, as we I recently learnedIt took Buffett years to achieve success and decades to become one of the most influential business leaders the world has ever seen.
Experience comes from learning from your mistakes. Perfection is unattainable, but mistakes help you grow as a person and improve your performance and career. Buffett knows this better than anyone. Although he believes that “it’s good to learn from mistakes. It’s better to learn from other people’s mistakes,” he addressed his own career mistakes with a mix of humility and humor.
Most importantly, he changed past failures quickly, learning from them without dwelling on the negative or stagnating in shame. Here are eight examples of Buffett’s self-admitted financial mistakes and what you can learn from them.
1. Buying Berkshire Hathaway
Crazy, right? As Motley Fool explains, Buffett bought Berkshire in 1964, when it was a less than prosperous textile company. Although he had been following the stock price and bought it when it fell more than he expected, he found himself owning a textile company, something he knew nothing about. Keeping it as a textile company until 1985, Buffett eventually turned the company into the conglomerate he runs today, but this early faux pas taught him valuable lessons: do your research, don’t let your emotions dictate your actions, and be willing to change or adapt your thinking when It’s about investing.
2. Buying Waumbec Mills
Although he wisely avoided investing in New England textile companies for nearly 50 years, he bought his second (after Berkshire) in 1975, when it was a bargain. Grand plans for “projected synergies” with Berkshire’s textile business never materialized and the factory closed a few years later.
3. Buying Dexter shoes
Describing it as “the most horrible mistake” he has made since Waumbec, Buffett failed to see how foreign competition would ruin his acquisition of Dexter Shoe, a company he had high hopes for when Berkshire bought it for $433 million in 1993. The company’s subsequent plummeting value is one thing, but buying Dexter with Berkshire stock instead of cash compounded Buffett’s mistake, leading him to fail. declare“As a financial disaster, this deserves a place in the Guinness Book of World Records.”
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4. Don’t buy Amazon
In 2017, Buffett admitted that he had had his eye on Amazon for a long time, but never chose to invest in it, both in 1994, when Amazon was starting out, and in 1997, when it went public. While not exactly a mistake, it was a lapse in recognizing potential and that it could happen to anyone. “I knew he (founder Jeff Bezos) would do the most with any idea he had. I had no idea I had this potential. I screwed up,” Buffett said. Berkshire owns Amazon stock now, but it’s worth a fraction of what it would be worth.
5. Don’t buy Google
Once again, Buffett admired Google’s stock from afar, but never took any chances. The reason is that technology companies and their business models were outside the scope of his experience, which is a good lesson and a rule for investing. Researching and buying well-managed companies is critical to Buffett and Berkshire’s success. With Google, he wasn’t sure of its long-term growth trajectory, even though the company was doing great business with its advertising, advertising he received a portion of through clicks on Geico, a Berkshire subsidiary. On this rare occasion, Buffett couldn’t see the forest for the trees.
6. Not selling Tesco
Buying shares in the UK supermarket chain (total investment in 2012 = $2.3 billion) quickly turned into a headache for Buffett when he began to see weaknesses in the company. Despite having sold 114 million shares throughout 2013, it took him a long time to sell them. “In the business world, bad news often comes in series: you see a cockroach in your kitchen; As the days go by, you meet his relatives.” Its “delay” would cost Berkshire $444 million, according to CNBC Make It.
7. Purchase of Energy Futures Equity Debt Securities
Buffett has been outspoken about buying $2 billion in bonds from Energy Future Holdings Corp., created in 2007 from the $45 billion acquisition of Dallas-based TXU Corp.. and Berkshire Vice Chairman Charlie Munger. “About $2 billion of the debt was purchased by Berkshire in accordance with a decision I made without consulting Charlie.” Buffett finally threw in the towel, selling the bonds for a mere $259 million (leaving Berkshire with a pre-tax profit of $873 million). loss, per Reuters), but learning a valuable lesson: If you have a trusted partner, talk to them about any big investment decision.
8. Not researching Lubrizol Corp. stocks.
In 2011, David Sokol, chairman of many Berkshire subsidiaries, introduced Buffett Lubrizol Corporation as a potential acquisition target. However, he did not inform Buffett and neglected to inform Buffett that he owned shares in the chemical company. Berkshire was criticized, but ended up buying the company for $9 billion, netting Sokol a tidy $3 million from the sale. Lesson? Follow a rigorous due diligence process and never take someone’s word for it without investigating them further.
Even Warren Buffett doesn’t get things right all the time, but he owns up to his mistakes like a champ. But mistakes for Buffett are opportunities to learn something and approach difficulties with an open mind and a new perspective, and that’s just another lesson you can learn from the great investor.
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This article originally appeared on GOBankingRates. with: How to learn from your financial failures like Warren Buffett