Believe in the 'Keep it Simple' principle
One look at the Buffett's portfolio and you realize that it is made up of the dullest businesses around. At a time, when everyone is talking about hi-tech stuff in industries ranging from electronics to automobiles, Buffett goes about buying businesses engaged in selling candies, soft drinks mattresses, shoes, paints, jewelry etc.
What could be the reason for this boring divergence? It is his ability to make a reasonable guess of the future of these companies rather than companies involved in selling complex and technologically intensive products. After years of looking at businesses minutely, he has come to the conclusion that the more simple and easy to understand the company's products are, the better is an investor's ability to value such companies.
He goes on to say, "To the extent we have been successful, it is because we concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers."
This does not mean that one should not invest in companies dealing with technology. If one has an understanding of how technology in the company under consideration works and is able to predict its future, then he should go ahead with his investment. It all boils down to one's circle of competence.
Image: Handmade candies seen at a store in Berlin. | Photograph: Gabe Palacio/Getty Images Andreas Rentz/Getty Images
Also read: The top 10 best-selling cars ever
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