7 Warren Buffett Investment Principles That Made Him a Mega Billionaire
Warren Buffett, dubbed the "Oracle of Omaha", has built an extraordinary legacy of wealth through disciplined stock investing and consistent business principles over several decades. In this article, we explore 7 Warren Buffett Investment Principles You Can Practise. His approach does not depend on market seasons. It has proven effective across generations. Let us look at each of Buffett''s golden principles that you can adopt.
1. Intrinsic Value Matters More Than Market Price
Buffett believes the foundation of investing lies in intrinsic value — the true worth of a company, not merely the stock price in the market.
According to Buffett, "Price is what you pay; value is what you get."
For example, when he invested in Coca-Cola in 1988, he was convinced the company''s true value was far higher than its share price at the time — and it proved to be one of the most successful investments in his lifetime.
How to Apply This Principle:
Focus on companies with strong cash flow, consistent earnings growth, and healthy debt ratios. Buy only when the price is well below the true value — this provides a margin of safety in case your calculations are wrong. In the Mahersaham Gold Package, we provide a complete module on advanced fundamental analysis techniques used by Buffett.
2. Protect Your Investments by Investing in Companies with "Moats"
Buffett favours investing in companies that possess long-term competitive advantages — ones that are difficult for competitors to replicate.
Classic example: American Express. A strong brand, a loyal user network, and high switching costs make their business hard to challenge.
A modern example? Apple. Users are locked into their product ecosystem — from iPhone to Mac, iCloud, and App Store.
The company''s position within its industry, brand strength, stable profit margins, and the ability to maintain pricing power under competitive pressure.
3. Let Your Profits Compound
Buffett''s wealth was built slowly but consistently — through the power of compound interest.
Simple example: If you invest RM10,000 and it grows at 10% per year, after 30 years it becomes RM174,494. That is the magic of time and patience.
According to Buffett: "The stock market is designed to transfer money from the active to the patient."
What Can We Learn From This?
Do not trade shares too frequently. Focus on quality, durable companies — and let profits accumulate, just as Buffett held shares in GEICO and See''s Candies for decades.
4. High Conviction, Not Excessive Diversification in Your Stock Portfolio
Buffett does not believe in broad diversification without focus.
His philosophy is simple: "Imagine you only have 20 investment opportunities in your entire lifetime. With that, you would certainly be more careful in choosing."
So, pick shares that you truly understand the business of, and maintain high conviction. When you find an extraordinary company — go all in.
Example: Coca-Cola once represented over 30% of Berkshire Hathaway''s portfolio. And Buffett himself has kept more than 99% of his wealth in his own company''s stock since the 1960s.
His message: "Put all your eggs in one basket, but make sure you watch that basket day and night."
5. Be a Contrarian Investor During Crises
During the 2008 financial crisis, Buffett invested US$5 billion in Goldman Sachs.
The company was struggling, but he saw a massive opportunity — and ultimately earned enormous returns.
The key? Cash reserves.
When other investors panicked, Buffett was ready to buy.
He said: "Be fearful when others are greedy. And be greedy when others are fearful."
What Should We Do?
Ensure you always have emergency cash to seize opportunities when the market falls. Prepare a list of quality shares
that you want to buy when the stock market is crashing hard.
6. Prioritise Companies That Generate Real Cash Flow
Buffett favours companies that produce consistent and predictable free cash flow.
For example: GEICO, the insurance company owned by Berkshire. Premiums collected provide continuous capital for other investments.
What should investors look for in financial reports?
Ability to generate cash consistently
Stable profit margins
Efficiency in working capital management
A track record of wise capital allocation
A company that can grow without constantly needing fresh capital injections is a solid company.
7. Never Stop Learning, Even When You Are Already Wealthy
Despite his success, Buffett still reads 5-6 hours a day. This has been his daily routine since childhood.
He emphasises the importance of knowledge and the willingness to change your stance when the facts change.
Look at how he began investing in technology companies like Apple, even though he was once highly sceptical of the sector.
He said: "The more you learn, the more you can earn."
The moral?
Never become complacent. The business world and stock market are constantly evolving. Keep upgrading your knowledge and understand new business models.
Final Thoughts: Building Wealth the Buffett Way
All 7 Warren Buffett investment principles you can practise are not based on speculation or trend following. They are built on logic, real value, and patience.
If you are a dedicated Technical Analysis follower, these may not seem quite suitable.
In the Mahersaham Gold Package, we provide a module on how to combine technical analysis and Buffett-style fundamentals for hunting high-potential companies before their shares take off.
Technical analysis is used for timing the market, while fundamental analysis is for selecting which company''s shares are the best to buy.
If you are serious about building long-term wealth — you can practise these 7 principles.
The stock market will always change. Technology has already changed. But principles such as value, competitive advantage, and long-term investing never go out of style.
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