I always look forward to reading Warren Buffett’s annual letter to Berkshire Hathaway shareholders. He gives free advice and there are always valuable lessons we can learn.
Mr. Buffett is one of the most successful investors of all time. Called the “Oracle of Omaha”, Buffett is chairman, and CEO of Berkshire Hathaway. A $10,000 investment in Berkshire Hathaway when Buffett took control in 1965 would be worth more than $50 million today.
Here is some of Buffett’s sage advice from his annual shareholder letter that I found interesting and wanted to share:
- Prepare for the future because the future is always uncertain. You don’t know what tomorrow will be like. Have a large emergency savings fund. For example, Berkshire Hathaway has about $20 billion in reserves.
- Avoid debt. Do everything in your power to avoid consumer debt. When you are in debt, you struggle to make ends meet. This can snowball into worse things like bankruptcy and foreclosure. Be wary of leverage.
- Prepare for the positive. Tomorrow may hold something disastrous, but it may also present some wonderful opportunity. This is another argument for having lots of cash available. You will be well prepared to handle the negatives life throws at you and take advantage of the opportunities.
Included in the annual report, Mr. Buffett included a touching letter sent in 1939 from his grandfather Ernest. The letter gives excellent advice on the importance of having cash reserves. The letter from his grandfather can be found on page 23. Click on the link to read the full report to shareholders. http://www.berkshirehathaway.com/letters/2010ltr.pdf