3 investment lessons to learn from Warren Buffett's mistakes

Warren Buffett, CEO of Berkshire Hathaway

Despite being known for his legendary business skills, billionaire and chairperson of Berkshire Hathaway Warren Buffett has admitted to making several investing mistakes over the years which ended up turning into valuable lessons for investors.

Here are three of them:

1.) Letting emotions fuel investments

Warren Buffett told CNBC in 2018 the dumbest stock he ever bought was Berkshire Hathaway. He explained that he first invested in the company in 1962 when it was a failing textile business and believed that he would make a profit when more mills closed. But later, when Berkshire Hathaway tried to make tried to more money out of Buffett, he let emotions get the better of him and in spite, he bought control of the company, fired the manager, and tried to keep the textile business running for two more decades. The decision cost him $200 billion, Financial Express stated.

2.) Underestimating competitors

In 2017, when Warren Buffett was asked why he had never bought stock in Amazon, he admitted that he did  not invest in the company despite having followed it for a long time because he underestimated Jeff Bezos.

According to Financial Express, he said, "I was too dumb to realize. I did not think Jeff Bezos could succeed on the scale he has... Obviously, I should have bought it long ago, because I admired it long ago. But I didn’t understand the power of the model as I went along. And the price always seemed to more than reflect the power of the model at that time. So, it’s one I missed big time.”

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3.) Confusing revenue growth with a successful business

Warren Buffett bought US Air stocks in 1989 after being attracted by its high revenue growth but the company did not earn enough to pay the dividends due on the stock. Eventually though, Warren Buffett got his principal and dividends back after he and partner Charlie Munger quit the board and a new CEO took over. “Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it," Financial Express quoted him as saying. "The lesson for investors from this mistake is to research every investment before buying, so you know exactly what you are getting into."

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