Over the past two decades, Robert G. Hagstrom, CFA, has written several books on Warren Buffett. This new book, however, is unique in that it focuses on the thought process of investing. Many books, videos, talks and articles about Buffett attempt to help individual investors and fund managers emulate him. Few of their readers come close to replicating Buffett’s success. Hagstrom argues that there is a big difference between knowing the path and walking the path. He argues that the key to the latter is having a ‘money mind’ and that Warren Buffett’s mind is the ‘ultimate money mind’.
Hagstrom explores the traits that are needed to have a money mind. They include autonomy, rationality, pragmatism and continuous learning. The book provides insight into how successful investors have developed these attributes over a lifetime of work and experience.
The author begins with the importance for the financial mind to learn from both the successes and failures of past businesses. This historical study provides valuable information on all current opportunities. Hagstrom recounts how Warren Buffett has been an avid reader and keen observer since childhood. He was particularly influenced by a book he read when he was 11 years old that analyzed various businesses started from scratch.
Although the book offers many takeaways, the most important thing for me is how to operate in the “investment zone”. This becomes possible by focusing on the fundamentals of a business. I must remember that I am not in competition with investors or short-term speculators. I shouldn’t be bothered by the daily noise of price swings, but cling to the belief that the market will eventually price the stock correctly.
The book also provides perspective on perennial investment controversies. For example, investors constantly debate the relative merits of growth and value stocks. They also constantly discuss the discount rate that should be applied to future earnings, a particularly hot topic in a world of low interest rates.
Additionally, Hagstrom offers insight into the life and work of luminaries such as Benjamin Graham, Bill Miller, William James, and Howard Buffett (Warren’s father). It also covers the camaraderie between Warren Buffett and Charlie Munger. Taking a leaf from the book that influenced Warren in 1941, A thousand ways to win $1,000the author provides a collection of books that investors should read.
Warren Buffett: Inside the Ultimate Money Mindset is essential reading for investment professionals, active investors, and students aspiring to a career in money management. Its concepts are lucidly explained and well supported by data. This shouldn’t be a one-time read, but rather a guide for the rest of one’s investing career.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.
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