Warren Buffett: Learning To Invest Through Practical Application

During the 2007 Berkshire Hathaway Annual Meeting, Warren Buffett discussed the importance of actual experience in investing, comparing theoretical knowledge to the experiential learning that comes with real-world practice. This is akin to the difference between reading about romance and experiencing it. Buffett suggests starting with investments on a small scale that pose minimal financial risk, as practical experience is crucial to discovering one’s passion and aptitude for investing. Here’s an excerpt from the meeting:

Well, I think you should read everything you can. I can tell you in my own case, I think by the time I was — well, I know by the time I was ten — I’d read every book in the Omaha Public Library that had anything to do with investing, and many of them I’d read twice.

So I don’t think there’s anything like reading, and not just as limited to investing at all. But you’ve just got to fill up your mind with various competing thoughts and sort them out as to what really makes sense over time. And then once you’ve done a lot of that, I think you have to jump in the water, because investing on paper and doing — you know, and investing with real money, you know, is like the difference between reading a romance novel and doing something else. (Laughter)

There is nothing like actually having a little experience in investing. And you soon find out whether you like it. If you like it, if it turns you on, you know, you’re probably going to do well on it. And the earlier you start, the better, in terms of reading.

But, you know, I read a book at age 19 that formed my framework for thinking about investments ever since. I mean, what I’m doing today at 76 is running things through the same thought pattern that I got from a book I read when I was 19.

And I read all the other books, too, but if you — and you have to read a lot of them to know which ones really do jump out at you and which ideas jump out at you over time. So I would say that read and then, on a small scale in a way that can’t hurt you financially, do some of it yourself.

You can watch the entire meeting here: