The 'Warren Buffet' Approach, 'The Snowball', superior to Ben Graham
Reading Buffet's biography ‘The Snowball' was an eye-opener on many different levels.
Buffet had huge respect for Ben Graham and the manner in which he found and analysed companies, but even he admitted in the end that Graham's "cigar butt" approach and the manner in which he (over-)diversified his investments was not necessarily the right way to move forward.
A company's balance sheet and income statement told all according to Graham, but the reason why Buffet has stuck with investments like KO through all the ups and downs is because he realises the value in Coca Cola's products and their growth potential, even now.
And more importantly that it's a company's management that can make or break a company, something which was faltering for a long time at KO and took much longer then Buffet expected to be properly rectified.
In the end Buffet teaches you that patience is key when investing, something which is severely lacking in this day and age. Sometimes you have to wait and wait for the right opportunities to come along. And when they do, stick by your guns and concentrate your investments. Buffet’s GEICO investment is probably the best example of this approach over the years.
When you are within 15-20 years before retirement there is nothing wrong with wanting more diversification and a more stable income stream, but if you're younger than 45 or have only been investing for a couple of years, with limited capital, one would be wise to follow the 'Buffet' approach.
"You only have to do a very few things right in your life so long as you don't do too many things wrong." Of course that realisation is key not only in investing, as everyone will agree that a health body and sound mind, along with a loving family, is more important than any amount of money.
Perhaps this is the wisest lesson one can take from Buffet and why his legend has only grown later in life through his contributions to charity and through the Gates Foundation.