“When it's raining gold, reach for a bucket, not a thimble."—Warren Buffet

When it comes to the world of investments - especially in the stock market - Warren Buffet, the Chief Executive Officer of Berkshire Hathaway, is an enigma.

On an international flight recently, I was privileged to watch a documentary on this investment guru, who is also one of the world’s richest men. Celebrated as the “Oracle of Omaha” because of his unparalleled success in the stock market, Warren Buffet lives the life of your regular next-door neighbour, hardly eats in classy restaurants and drives a regular, used 4-wheel drive.

He is many things to many people. To some, he is an eccentric. To others, he is just a plain old miser. But to those who have put their investment eggs into his basket, he is an investor’s delight.

Every few years, his critics say he has lost his mind. According to them, he is too old-fashioned and out of touch. But year after year, The Oracle has proved critics wrong and has literally made them eat their words. He is classical proof of the aphorism that those who say it cannot be done should get out of the way of those who are doing it! And for proof, a stake of $10,000 in BH shares in 1965 is now worth $80,000,000!

During the dot.com fad, Buffet refused to get involved. He was mocked by pundits for being so naïve that he could not see that this was the way to go. He had the last laugh.

At the peak of the global economic meltdown in 2008, when the American Dow Jones Average crashed below 7,000, Buffet became the butt of pundits’ jokes when he made heavy investments in General Electric and Goldman Sachs, two companies, whose shares had crashed significantly in the wake of the crisis. Again, Buffet has carried the day and is smiling his way to the bank along with his shareholders.

At the Annual General Meeting of Berkshire Hathaway, on 27th February 2010, when the 2009 reports were unveiled, net earnings had rocketed to $5,193 per share, while book value jumped 20 per cent to a record high.

Berkshire's Class A shares, which slumped to nearly $70,000 last year, have suddenly soared to $120,000. The crazy investments on General Electric and Goldman Sachs have yielded Billions.

How does he do it? Buffett explained his beliefs to new investors in his letter to stockholders at the AGM. Hear him:

Stay liquid
"We will never become dependent on the kindness of strangers. We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses."

Buy when everyone else is selling
"We've put a lot of money to work during the chaos of the last two years. It's been an ideal period for investors: A climate of fear is their best friend. . . . Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."

Don't buy when everyone else is buying
"Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying.”

Value, value, value
"In the end, what counts in investing is what you pay for a business -- through the purchase of a small piece of it in the stock market -- and what that business earns in the succeeding decade or two.”

Don't get suckered by big growth stories
Buffett further reminded investors that he and Berkshire’s Vice Chairman, Charlie Munger,  "avoid businesses whose futures we can't evaluate, no matter how exciting their products may be."

Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. "Dramatic growth" doesn't always lead to high profit margins and returns on capital.

Understand what you own
"Investors, who buy and sell based upon media or analyst commentary are not for us.

“We want partners, who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it's one that follows policies with which they concur."

Defense beats offense
"Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the 11 years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue."

If you desire investment success for the tough times, how about heeding warren Buffet’s advice?
Remember, the sky is not your limit, God is!