And the truth behind that folksy exterior
SMITH BRAIN TRUST – What makes Warren Buffett a super investor? AARP Magazine recently posed this question to Maryland Smith’s David Kass for a piece commemorating the 90th birthday of the iconic investor and philanthropist with an estimated $80.5 billion fortune.
Kass, clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business, in response, identified and fleshed out three defining traits: hard work, training and patience in this excerpt from “Warren Buffett Is Still Making Money — and Giving It Away — at 90.”
Hard Work. Start with hard work. When Buffett was a boy, he delivered newspapers, sold golf balls and stamps, and washed cars for extra cash. During his working life, he typically spent 12 hours a day reading, says [Kass]. “I imagine by now he's down to eight hours a day,” Kass says, “but he's constantly reading financial reports and statements."
Another is training. Buffett's studies with Graham, who is widely known as the “father of value investing,” left a lasting impression. “The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety,” Buffett said. “That's what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing."
And finally, there's patience — or what Buffett calls temperament. “Buffett would say, half-jokingly, ‘If you have an IQ above 125, sell the extra points,'” says Kass. “That's all you need. After that, it's all temperament.” The patience to hold stocks for the long term is part of what Buffett calls temperament. The other part is to be in control of your emotions. If you're terrified when the stock market is falling, you won't be able to take advantage of stocks selling at bargain prices. If you're euphoric when the market is soaring, you'll pay too much. And in either event, you won't be able to hold stocks for the long term.
AARP also asked Kass, who has followed Buffett’s investments and philosophy since 1980 and who has taken several Maryland Smith students to Omaha to meet the “oracle” himself: Can a man with more than $80 billion in the bank really have the modest, folksy persona that Buffett is known for?
Kass’ reply: “That's who he is. He's a naturally friendly, warm individual, and has always been that way. He has a great sense of humor and loves to teach — he has said that if he hadn't been a portfolio manager, he'd have been a professor."
Read more at AARP magazine's “Warren Buffett Is Still Making Money — and Giving It Away — at 90.”
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