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Warren Buffett has two rules for investing.
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.
The Oracle of Ohama, as the Nebraska native has been dubbed, has done very well for himself — and investors — by sticking to those two mandates.
Buffett is co-founder, chairman, and CEO of Berkshire Hathaway (BRK.A) (BRK.B) , which owns about 65 companies and hundreds of subsidiaries.
And he is currently the seventh richest person on Earth, with a total net worth estimated at $133 billion, according to the Bloomberg Billionaire Index.
The 93-year-old Buffett takes the long view on investing. After all, this is the guy who said, "someone is sitting in the shade today because someone planted a tree a long time ago."
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Buffett's investment style is legendary
Buffett described his company’s journey "as a bumpy road involving a combination of continuous savings by our owners ... the power of compounding, our avoidance of major mistakes and — most important of all — the American Tailwind."
"America would have done fine without Berkshire," he said in his 2022 shareholders letter. "The reverse is not true."
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Of course, nobody is perfect, Buffett included. He has freely admitted that skipping over the opportunity to invest in Alphabet's (GOOG) Google was one of his major blunders.
And don't even get started on Dexter Shoes, which he bought in 1993 and which resulted in a $3.5 billion loss to shareholders when what Buffett "assessed as a durable competitive advantage vanished within a few years."
Buffett has said, “To date, Dexter is the worst deal that I’ve made.”
In a letter to shareholders, he said, "But I'll make more mistakes in the future. You can bet on that."
Nevertheless, Buffett has generated annual returns averaging about 22%, roughly doubling the S&P 500.
Buffett: Know when to fold 'em
While the billionaire likes to say that "our favorite holding period is forever," he has parted company with plenty of companies.
Buffett has said that he will sell if his conglomerate needs money for something else or "when we think we're reevaluating the economic characteristics of the business."
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Berkshire Hathaway's filings with the Securities and Exchange Commission can give insights into Buffett's reasoning.