How To Invest When You Are Not An Expert

wealthymattersIn 1986, Warren Buffett bought a 400-acre farm in Nebraska, and in 1993, he invested in a retail property near the New York University campus. The deals came after farming and real estate bubbles had burst, and in both cases, he knew very little about the day-to-day operations of what he was buying. But Buffett saw the potential. And while he may not have known about farming or building management, he knew people who did.

Buffett’s son ,Howard,who is a farmer, gave him a rough idea of the costs and returns. A fellow investor in the New York building was a seasoned buyer of real estate who could help to manage it.

Years later the farm is worth five times what he paid for it, and the building now throws off annual distributions that exceed 35% of the initial equity investment. “You don’t need to be an expert in order to achieve satisfactory investment returns,” Buffett writes. “But if you aren’t, you must recognise your limitations and follow a course certain to work reasonably well.”

Here’s how he explains his mind set: “With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations.”

About Keerthika Singaravel

2 Responses to How To Invest When You Are Not An Expert

  1. I really respect that he said “recognize your limitations” as that is often overlooked.

Please Leave Me Your Comments!I Love Reading Them!

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: