Teachers’ Day: Five key lessons of investing from legendary investors like Warren Buffett, Peter Lynch and Morgan Housel

Updated: 05 Sep 2022, 11:38 AM IST

From value investing and significance of soft skills to rupee cost averaging, we reproduce the key investing lessons which one can learn from the legends. Check these out here

Warren Buffett is also known as the Oracle of Omaha

Today, students and teachers around the country are celebrating the Teachers’ Day. On this occasion, we describe some of the money lessons one can learn from the legendary investors such as Warren Buffett, Benjamin Graham, Peter Lynch and John Templeton.

Although the underlying philosophy of most of these top investors is similar if not the same, i.e., to maximise the returns by incurring the least loss possible; the ways and strategies, however, tend to differ. And this is exactly what try to decode here:

1. Value investing by Warren Buffett: Popularised by Warren Buffett, value investing is scouting for securities with prices that are fairly low based on their intrinsic value. Although there isn't a simple way to determine intrinsic worth, but it can be computed by analysing a company's fundamentals.

The value investor entails looking searches for shares that are believed to be undervalued, or the ones that are valuable but not recognized by the most of other buyers as yet.

2. Rupee cost averaging by Benjamin Graham: Popularised first as the dollar cost averaging (DCA), this means buying stock units at different price points period staggers the overall price during a long time period. This is the idea behind investing via SIPs (systematic investment plans) wherein mutual fund units are invested every month based on the amount of contribution.

3. Doing proper research by Peter Lynch: The idea of doing proper research was propagated by a number of proponents of fundamental research including Peter Lynch.

Some investors make the mistake of looking at stocks differently than they look at everything else. For instance, when they buy a fridge, they are expected to carry out some research. But on the other hand, they will buy some random stock about which they overheard from someone at work.

And they do not mind doing it without any idea of what the company does. Later, they wonder why they lose money.

4. Understand the soft skills by Morgan Housel: The author of The Psychology of Money says, financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know. He argues that the soft skills are more important than the technical side of money.

“We think about and are taught about money in ways that are too much like physics (with rules and laws) and not enough like psychology (with emotions and nuance). Physics isn’t controversial. It’s guided by laws. Finance is different. It’s guided by people’s behaviours,” says Housel.

5. Investing is global by John Templeton: He was the one who promoted the idea of global diversification, although he didn’t invent it. After studying law as a Rhodes Scholar at Oxford, he travelled to 35 countries in seven months.

In his travels,  John Templeton noticed that there were far too many opportunities outside the America to overlook. And that was in the 1930s. Even today, experts often reinforce the idea of international investing. For him, it was always just common sense.

Warren Buffett underscores the importance of saving consistently 
First Published: 05 Sep 2022, 11:38 AM IST