With a net worth exceeding $156 billion, Warren Buffett is one of history’s most successful investors. Since taking control of Berkshire Hathaway in 1965, Berkshire Hathaway’s overall stock return from 1965 through 2023 was 4,384,748%. S&P 500’s overall return: The S&P 500’s overall gain for the same period (1965-2023) was 31,223%
Yet despite his openness about his investment philosophy, few follow his wealth-building principles. Why? While his advice seems simple, it requires uncommon discipline and patience. The actual “secrets” of Buffett’s success aren’t hidden – they’re simply hiding in plain sight, consistently shared yet rarely followed.
Here are ten wealth-building lessons from the Oracle of Omaha that most investors understand but few implement:
1. Invest in Yourself First
“The most important investment you can make is in yourself. It’s the one investment that will pay off for the rest of your life.” – Warren Buffett.
Before building his investment empire, Buffett invested heavily in himself. “Well, I think you should read everything you can. I can tell you in my own case. I know by the time I was ten, I’d read every book in the Omaha Public Library that had anything to do with investing, and I’d read many of them twice. So I don’t think there’s anything like reading, and not just as limited to investing at all. But you’ve just got to fill up your mind with various competing thoughts and sort them out as to what really makes sense over time.” – Warren Buffett.
At age 20, he paid $100 for a Dale Carnegie public speaking course— a significant sum in 1950—because he recognized that his fear of public speaking would limit his potential.
Throughout his career, Buffett has maintained that improving your skills, particularly in communication, produces returns far exceeding any market investment. While most people chase market returns, Buffett suggests focusing first on developing your marketable talents.
This means investing time in learning, skill development, and personal growth before worrying about stock picks. What skill could you develop to increase your earning power for decades?
2. Live Well Below Your Means
“If you buy things you don’t need, soon you will have to sell things you need.” – Warren Buffett.
Despite having the means to own virtually anything, Buffett still lives in the same modest Omaha home he purchased for $31,500 in 1958. He drives modest cars and lives frugally relative to his wealth. This isn’t miserliness – it’s disciplined capital allocation.
Every dollar saved becomes a soldier working toward building wealth. Buffett understands that the gap between income and spending creates financial freedom. While society encourages upgrading your lifestyle with each income increase, Buffett demonstrates the power of delayed gratification. The most practical step? Automatically save and invest a significant portion of every income increase rather than expanding your lifestyle.
3. Focus Beats Diversification
“Diversification is protection against ignorance. It makes little sense if you know what you’re doing.” – Warren Buffett.
While financial advisors typically recommend broad diversification, Buffett has created enormous wealth through concentrated positions in businesses he deeply understands. His famous investments in Coca-Cola (first purchased in 1988), American Express (during the 1963 Salad Oil Scandal), and, more recently, Apple demonstrate his willingness to make substantial bets within his “circle of competence.”
Buffett suggests that average investors may need diversification precisely because they lack deep knowledge of specific businesses. The key insight: instead of spreading investments thinly across dozens of companies you barely understand, develop expertise in a few industries or business models, then invest with conviction when opportunities arise within your circle of competence. Buffett has held over 99% of his net in Berkshire Hathaway stock for over 60 years.
4. Hold Cash Strategically
“Cash is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.” – Warren Buffett.
While many investors stay fully invested, fearing “cash drag,” Buffett maintains substantial reserves waiting for exceptional opportunities. Berkshire Hathaway routinely holds billions in cash—not out of fear but as strategic ammunition. As of the latest financial reports, Berkshire Hathaway’s cash holdings have reached a record high of $334.2 billion.
During the 2008 financial crisis, Buffett deployed billions, including $5 billion, to Goldman Sachs precisely because he had cash available when others desperately needed it. The typical investor always stays fully invested or holds cash out of fear.
Buffett’s approach is different: hold some money not as a defensive measure but as an offensive weapon to deploy when genuine bargains appear. Consider keeping 10-20% of your portfolio in cash, not as a permanent allocation but as opportunity capital for market downturns.
5. Ignore Daily Market Noise
“The stock market is designed to transfer money from the active to the patient.” – Warren Buffett.
Buffett famously suggested that if you aren’t comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes. He rarely checks daily stock prices and pays little attention to financial television or short-term market predictions. This isn’t naivety – it’s recognition that daily market movements are mostly noise rather than signal for long-term value investors.
While most investors obsessively track portfolios and react to every market swing, Buffett focuses on business fundamentals and competitive positioning. The practical application? If you want to be an investor like Buffett, check your portfolio less frequently, perhaps monthly or quarterly rather than daily, and evaluate investments based on business performance rather than price movements.
6. Study Failures, Not Just Successes
“It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.” – Warren Buffett.
Buffett devotes significant time to studying business failures and investment disasters. His investment in Dexter Shoes, which he called his worst investment ever, taught valuable lessons about competitive advantages and industry dynamics.
Buffett practices “inversion”—thinking backward from failure rather than solely focusing on paths to success. Most investors study only success stories, creating a survivorship bias in their thinking.
The actionable lesson: examine a corresponding failure for every success you study; what caused promising businesses to collapse? Why did seemingly substantial competitive advantages erode? These lessons often provide more valuable insights than success stories alone.
7. Read Voraciously, But Selectively
“Read 500 pages every day. That’s how knowledge works. It builds up, like compound interest.” – Warren Buffett.
Buffett spends 80% of his working day reading – annual reports, business periodicals, biographies, and industry analyses. His late business partner Charlie Munger once noted, “In my whole life, I have known no wise people who didn’t read all the time.”
However, Buffett’s reading is highly selective, focusing on material with lasting value rather than daily market commentary or hot stock tips. He recommends books like Benjamin Graham’s “The Intelligent Investor” and biographies of business leaders that provide timeless wisdom.
The key insight is that quality matters more than quantity. Develop a reading routine focused on books and materials with enduring value rather than ephemeral market predictions.
8. Embrace Inaction
“The difference between successful people and successful people is that successful people say no to almost everything.” – Warren Buffett.
Buffett often compares investing to baseball, except “there’s no strike zone, and you can stand there all day waiting for the perfect pitch.” Most investors feel compelled to constantly buy, sell, and rebalance.
Buffett’s approach is the opposite: do nothing until exceptional opportunities arise. This requires uncommon patience and psychological strength to resist activity for activity’s sake. In practice, this means making few but significant investment decisions rather than frequent trades and being willing to hold cash for extended periods while waiting for compelling opportunities.
9. Use Debt Sparingly or Not at All
“It is insane to risk what you have and need for something you don’t need… If you’re already wealthy, there’s no upside to taking on outside debt.” – Warren Buffett.
Buffett has witnessed countless brilliant investors and businesses destroyed by excessive leverage. Berkshire Hathaway maintains minimal debt and substantial liquidity, allowing it to weather economic storms that sink overleveraged competitors.
Buffett notes that smart people go broke through leverage, saying, “If you’re smart, you don’t need it; if you’re dumb, you shouldn’t use it.” In personal finance, this means avoiding margin loans for investments and maintaining conservative debt levels overall. While debt can amplify returns in good times, it can destroy capital permanently during downturns.
10. Seek Investments with Long Runways
“Our favorite holding period is forever. We are the opposite of those who hurry to sell and book profits when companies perform well.” – Warren Buffett.
Buffett focuses on businesses with enduring competitive advantages – what he calls “economic moats” – that can compound capital for decades. His investment in Coca-Cola has lasted over 35 years, generating enormous returns through dividends and appreciation.
While most investors chase hot trends or rapidly growing sectors, Buffett seeks businesses that will remain relevant and profitable for 50+ years. The practical application: focus less on quarterly growth rates and more on the durability of competitive advantages. Ask whether a business model will still work a decade from now rather than just next quarter.
Conclusion
Buffett’s wealth-building wisdom isn’t complex, but it requires something rarer than intelligence: discipline—the gap between understanding and implementing his principles explains why few achieve even a fraction of his success.
His approach demands fighting against human nature—our tendency toward action over inaction, impatience over patience, and complexity over simplicity. By adopting even a few of these principles, which most acknowledge but few follow, you can gain a significant advantage in building lasting wealth. The true secret may be that there is no secret—just timeless principles applied with uncommon consistency.