Investment Lessons CFOs Can Learn from Warren Buffett

Investment Lessons CFOs Can Learn from Warren Buffett
Warren Buffett

According to a December 2012 survey, 59% of CFOs intend to aggressively increase their investment in growth and expansion opportunities throughout 2013. While investing to drive the bottom line is certainly an understandable motivation, one of the world’s richest men is a prime example of a steady approach to investing.

Warren Buffett has arguably built the most enviable career in the financial business, yet his strategies are oftentimes different from most male CFOs. Recent research shows that 24% of men are likely to make a “hot investment” – an investment without performing any research or in depth consideration. On the other hand, Warren Buffett is more likely to make a less risky but more calculated move. In fact, it’s been said that Buffett invests like a girl. And the statistics back it up.

“The most important quality for an investor is temperament, not intellect,” says Warren Buffett. For CFOs who want to continue driving the bottom line without the high level of risk their competitors take, consider learning from Buffett’s lead.

  • Do your research. By learning more about a situation and all factors involved, you’re less likely to make knee-jerk decisions. For instance, during the 2008 economic crisis, men panicked and sold their stocks. Women – and Warren Buffett – stayed put and capitalized on the recovery. While the S&P say gains of 9.2 percent, Buffett’s averaged 19.2 percent – for the last 40 years.
  • Don’t risk what you don’t know. Risk is always going to be part of investing. However, Warren Buffett has never and has no intentions of investing in technology companies. Why? Because he doesn’t understand the technological industry and isn’t afraid to admit it. Even though he’s close friends with Bill Gates, Buffett won’t invest in technology because he has no idea what the industry will look like 10, 20, or 50 years from now. Do what you know, Buffett says.
  • Eliminate any debt. Individuals aren’t the only ones in debt. Many businesses take big risk investments, which place them in debt, only to see the investment fail. On the other hand, Warren Buffett has purposefully aimed to keep Berkshire as cash rich as possible. If an investment would cause him to lose any sleep at night, he would not take it, Buffett says.